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    Cross-listing in the U.S. and domestic investor protection

    O'Connor, Thomas G. (2006) Cross-listing in the U.S. and domestic investor protection. Quarterly Review of Economics and Finance, 46 (3). pp. 413-436. ISSN 1062-9769

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    Using the change in ordinary dividend payout as a proxy for improved governance, we show that crosslisting in the U.S. is associated with enhanced protection for the minority ordinary shareholders of exchangelisted non-U.S. firms. These firms substitute dividends for enhanced governance. We find no such effect for Rule 144a Portal firms. Interestingly, we document evidence inconsistent with the legal bonding hypothesis for Level 1 OTC firms. We believe that their ability to pay lower dividends post-listing is primarily due to their ability to credibly commit to fair treatment of their minority investors, given their record for equitable treatment of their ordinary shareholders. They achieve this reputation by consistently paying out a sizable proportion of their earnings as dividends. In addition, we find that the firm-level governance of Level 1OTCfirms, as measured by the number of closely held shares improves in the post-listing period.We find no such effect for SEC Rule 144a traded firms. Our results have also important implications for the agency models of dividends.

    Item Type: Article
    Keywords: International cross-listing; Legal bonding; Dividend policy;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8497
    Identification Number:
    Depositing User: Thomas G. O'Connor
    Date Deposited: 25 Jul 2017 10:59
    Journal or Publication Title: Quarterly Review of Economics and Finance
    Publisher: Elsevier
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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