Olga Dodd

On the Role of Cultural Distance in the Decision to Cross-List

This paper examines the role of culture in the choice of the destination market for cross-listing. We argue that firms cross-list in markets that have greater cultural similarities as investors are unwilling to invest in firms from culturally dissimilar markets and managers may seek to avoid potential conflicts with culturally disparate investors and managers. Employing Hofstede’s (2001) Cultural Dimensions, we find strong support for the hypothesis that firms from developed markets show a greater propensity to cross-list in a country with similar values to their home market. These results are robust to a range of alternative cultural measures including modified Hofstede’s scores, societal practices scores from the GLOBE project and World Values Survey scores.

The impact of cultural diversity in corporate boards on firm performance

We examine the impact of cultural diversity in corporate boards of directors on firm performance. We construct a measure of cultural diversity by calculating the centroid of cultural distances between each board member using Hofstede’s cultural framework. Our findings indicate that cultural diversity in boards negatively affects firm performance measured with Tobin’s Q and ROA. These results hold after controlling for potential endogeneity using a non-contemporaneous specification and instrumental variables. The results are further robust to a wide range of board and firm characteristics, including various measures of ‘foreignness’ of a firm, and alternative culture frameworks. Further analysis reveals that only extremely high degree of cultural board diversity hurt firm performance. The impact of cultural diversity is also mitigated by the complexity of the firm and the size of foreign sales and operations. In addition, we find that not all aspects of cultural differences are equally important and that it is mainly the diversity in individualism and masculinity that affect effectiveness of boards of

Why Do Firms Cross-List Their Shares on Foreign Exchanges? A Review of Cross-Listing Theories and Empirical Evidence

Purpose - Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firms shares on a foreign exchange. Nevertheless, a significant number of firms continue to cross-list every year. This paper examines the recent cross-listing trends and reviews the literature on motives to cross-list. Design/methodology/approach - The literature review includes a summary of theoretical studies grouped into cross-listing theories including market segmentation, liquidity, investor recognition, information disclosure, legal bonding, proximity preference and business strategy theories, and also includes a discussion of testable implications and empirical evidence for each of the above mentioned cross-listing theories. Findings - An extensive cross-listing literature offers a number of theories on the motives to cross-list that in most cases complement each other by encompassing different aspects of the complex cross-listing behavior. Nevertheless, continuous market developments, such as significant regulatory and technological changes in the ways capital markets operate, raise new questions on why firms cross-list and call for further research to continue.

The Impact of Cross‐Listing on the Home Market's Information Environment and Stock Price Efficiency

We empirically examine changes in information asymmetry and informational efficiency of cross‐listed stocks in their home market around a cross‐listing in the United States. We estimate intraday market microstructure measures of information asymmetry and price efficiency, and find that a U.S. cross‐listing significantly improves the quality of a firms information environment and stock price efficiency in the home market. This improvement is stronger for cross‐listings that take place after the adoption of Sarbanes‐Oxley Act. Our results demonstrate that stricter disclosure from a U.S. cross‐listing is beneficial, in line with the legal and reputational bonding hypotheses.

NYSE Closure and Global Equity Trading: The Case of Cross-Listed and Domestic Stocks

Cross-listing in the US opens a new information channel for cross-listed stocks and makes the cross-listed stocks more dependent on the US market as a source of information and intermarket competition for order flow. We test this proposition by examining the effects of closures of the NYSE on trading of cross-listed stocks in their home markets. We use daily and intraday trading data for stocks from 36 countries that cross-list on the NYSE during the period 2009-2018 to estimate measures of stock liquidity and information efficiency of stock prices on normal days and on days when the NYSE is closed due to US public holidays and natural hazards. We document that, when the NYSE is closed, stocks that cross-list on the NYSE see a significant reduction in stock liquidity and information efficiency of stock prices in their home markets, over and above the reduction experienced by their domestic counterparts. In addition, we investigate several channels that could explain the documented reduction in liquidity and price efficiency - information, substitute and arbitrage channels. We document that cross-listed stocks are more affected by NYSE closure when they have greater dependence on the US market, and when arbitrage strategies are easier to implement, providing some evidence for the information channel and arbitrage channel arguments.