Edited by Geoffrey Poitras
Chapter 9: Cross-listing and the Evolution of Global Stock Market Liquidity
Manuela Geranio Debate on cross-listing began back in the 1970s, but is still alive and kicking. The globalization of capital markets, combined with the recent consolidation wave among stock exchanges, has encouraged growing competition among major listing centres to capture companies choosing to raise capital through equity issues beyond their home markets. Indeed, a company that cross-lists its shares can get listed on one or more equity markets besides the domestic one. The most common case of cross-listing is that of a secondary listing, which is where the main market remains the firm’s home market, while the secondary market is more likely a US exchange (or some other global financial hub). More rarely, in the case of a primary listing, the foreign market becomes the only stock exchange where the company’s shares will be admitted and traded. Typically, a company facilitates the negotiations of its shares in a foreign country by issuing depositary receipts (DRs or ADRs1). A depository receipt represents ownership in the shares of a foreign stock, according to a specified ratio, and is denominated in local currency (that is, dollars in the US). DR programmes’ complexity and costs vary, according to the aims of the issue (that is, trading only or also collecting new funds) and the targeted investors (institutional investors only or the general public). For instance, in the US, the easiest and least costly channel is the over-the-counter (OTC) segment, for which Level I ADRs are issued and traded on the OTC Bulletin Board or...
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