Where is the Market? Evidence from Cross-Listings in the U.S.

We explore two main questions. First, can two markets for a company’s shares coexist and, if so, what determines the distribution of trading volume across them? For firms cross-listed in the U.S. we find that in most cases U.S. trading is a significant fraction of total volume, and tends to be larger for companies based in countries that are geographically close, with low financial development and poor anti-insider trading protection. Moreover, the relative size of the U.S. market is larger if the company is small, volatile and high-tech. Second, we ask whether developing an active foreign market entails lower domestic trading activity. We find that for firms based in developed markets, the domestic turnover rate increases in the wake of cross-listing and remains permanently higher. In contrast, emerging market firms tend to experience a decrease in domestic trading activity.trading volume, cross-listing, flow-back

What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions

Despite the increasing integration of capital markets, geography has not yet become irrelevant to finance. Between 1986 and 1997, European public companies have increasingly listed abroad, especially in the U.S. We relate the cross-listing decisions to the characteristics of the destination exchanges (and countries) relative to those of the home exchange (and country). European companies appear more likely to cross-list in more liquid and larger markets, and in markets where several companies from their industry are already cross-listed. They are also more likely to cross-list in countries with better investor protection, and more efficient courts and bureaucracy, but not with more stringent accounting standards.cross-listings, going public, initial public offerings, geography, stock market competition

Does Corporate Social Responsibility Impact Equity Risk? International Evidence

Based on a large panel of listed firms from 52 countries in the period 2002–2020, we inves-tigate the relationship between corporate social responsibility (CSR) and equity risk. We confirm previous evidence that higher CSR scores are related to lower risk measures, con-sidering all types of risks: total, systematic, and idiosyncratic. Analyzing a large interna-tional sample allows us to investigate the role of country and company characteristics in the relationship between CSR scores and risk measures. The risk-reducing effect is more pronounced in weaker institutional environments. It is stronger in civil-law countries, in countries with low security regulation or disclosure requirement levels and where financial information is less widespread. Firms in high impact or high profile industries benefit more from CSR than firms in other industries as do firms that are not cross-listed. The financial crisis has increased the risk-reducing effect of CSR. The main results are confirmed in the COVID-19 period

Sovereign reputation and yield spreads: a case study on retroactive legislation

This paper uses recent legislation in Austria to establish a link between sovereign reputation and yield spreads. In 2009, Hypo Alpe Adria International, a bank previously co-owned by the regional government of Carinthia, had been nationalized by Austria’s central government in order to avoid a default triggering multi-billion Euro local government guarantees. In 2015, special legislation retroactively introduced collective action clauses allowing a haircut on both the bonds and the guarantees while avoiding formal default. We document that legislative and administrative action designed to partly abrogate the guarantees resulted in a loss of reputation, leading to higher yield spreads for sovereign debt. Our analysis of covered bonds uncovers an increase in yield spreads on the secondary market and a deterioration of primary market conditions

Risk control in asset management: motives and concepts

n traditional portfolio theory, risk management is limited to the choice of the relative weights of the riskless asset and a diversified basket of risky securities, respectively. Yet in industry, risk management represents a central aspect of asset management, with distinct responsibilities and organizational structures. We identify frictions that lead to increased importance of risk management and describe three major challenges to be met by the risk manager. First, we derive a framework to determine a portfolio position's marginal risk contribution and to decide on optimal portfolio weights of active managers. Second, we survey methods to control downside risk and unwanted risks since investors frequently have non-standard preferences which make them seek protection against excessive losses. Third, we point out that quantitative portfolio management usually requires the selection and parametrization of stylized models of financial markets. We therefore discuss risk management approaches to deal with parameter uncertainty, such as shrinkage procedures or re- sampling procedures, and techniques of dealing with model uncertainty via methods of Bayesian model averaging

Where is the Market? Evidence from Cross-Listings

We investigate the distribution of trading volume across different venues after a company lists abroad. In most cases, after an initial blip, foreign trading declines rapidly to extremely low levels. However, there is considerable cross-sectional variation in the persistence and magnitude of foreign trading. The ratio between foreign and domestic trading volume is higher for smaller, more export and high-tech oriented companies. It is also higher for companies that cross-list on markets with lower trading costs and better insider trading protection. Foreign trading is high close to the cross-listing date but decreases dramatically in the subsequent six months. This accords with the ‘flow-back hypothesis’ that declining foreign trading is associated with the gravitational pull of the home market.cross-listing; flow-back; trading volume

What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions

Despite the increasing integration of capital markets, geography has not yet become irrelevant to finance. Between 1986 and 1997, European public companies have increasingly listed abroad, especially in the US. We relate the cross-listing decisions to the characteristics of the destination exchanges (and countries) relative to those of the home exchange (and country). European companies appear more likely to cross-list in more liquid and larger markets, and in markets where several companies from their industry are already cross-listed. They are also more likely to cross-list in countries with better investor protection, and more efficient courts and bureaucracy, but not with more stringent accounting standards.Cross-Listings; Geography; Going Public; Initial Public Offerings; Stock Market Competition