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Cross-listing in the U.S. and domestic investor protection. Economics Department Working Papers Seroes N186/12/07

O'Connor, Thomas .G. (2007) Cross-listing in the U.S. and domestic investor protection. Economics Department Working Papers Seroes N186/12/07. National University of Ireland Maynooth. (Unpublished)

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Abstract

Using the change in ordinary dividend payout as a proxy for improved governance, I show that cross-listing in the U.S. is associated with enhanced protection for the minority ordinary shareholders of exchange listed non-U.S. firms. These firms substitute dividends for enhanced governance. I find no such effect for Rule 144a firms. Interestingly, I document evidence inconsistent with the legal bonding hypothesis for Level 1 firms. I 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. I find that the firm-level governance of Level 1 firms, as measured by the number of closely held shares improves in the post-listing period. I find no such effect for Rule 144a traded firms. My results also have important implications for the agency models of dividends.

Item Type: Other
Additional Information: Part of the Department of Economics Working Paper Series N186/12/07
Keywords: Cross-listing; legal bonding; dividend policy;
Subjects: Social Sciences > Economics, Finance & Accounting
Item ID: 830
Depositing User: Ms Sandra Doherty
Date Deposited: 12 Dec 2007
Publisher: National University of Ireland Maynooth
Refereed: No
URI:

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