Usha R. Mittoo

Globalization and the value of US listing: Revisiting Canadian evidence

As capital markets become integrated, the value of foreign listing and, consequently, the number of foreign listings should be expected to decline. The dramatic surge in foreign listings on US stock exchanges in recent years suggests that motivations and value of listing may also be changing as markets become increasingly globalized. We explore this issue by comparing both short- and long-run valuation effects of Canadian listings in the US in pre- and post1990 periods. We document that the positive price and liquidity effects for Canadian stocks surrounding US listing have declined over time. The analysis of long-run performance, however, shows that Canadian firms list in the US after a strong market performance but underperform Canadian market indexes by 13–30% over the three years after the listing in both pre- and post-1990 periods. Further, the determinants of long-run performance appear to be significantly different from that in the short-run. Our evidence suggests that valuation effects of US listing may be driven by several factors, including liquidity and industry factors, that vary cross-sectionally and over time. 2003 Elsevier B.V. All rights reserved.

Cross-Country Listing and Trading Volume: Evidence from the Toronto and Vancouver Stock Exchanges

This study investigates the effects of listing on the U.S. exchanges on trading volume for stocks listed on the two Canadian stock exchanges: the Toronto Stock Exchange (TSE) and the Vancouver Stock Exchange (VSE). The results show substantial differences between the two samples. When a TSE security is cross-listed, both trading volume and stock turnover, the number of shares traded as a percentage of number outstanding, almost double their pre-listing levels. In contrast, when a VSE stock is cross-listed, there is only a slight increase in trading volume and a sharp decline in turnover. The TSE is also able to maintain its pre-listing levels of trading volume in cross-listed securities, whereas the VSE loses about half the trading volume in these stocks to the U.S. exchanges. Even after controlling for the firm-specific factors, the Canadian exchange-specific factors remain the dominant factors in explaining the cross-sectional variation in liquidity effects. Neither the differences in trading costs nor in listing and disclosure requirements between the two exchanges explain these results.

Financial flexibility and the impact of the global financial crisis: Evidence from France

Purpose - The purpose of this study is to gain some insights into how managers perceive and achieve financial flexibility and its value in coping with the 2008 global financial crisis. The study focuses on the following questions: What are the sources and measures of financial flexibility? Do financially flexible firms suffer a lower impact from the crisis? Is financial flexibility related to business flexibility? and Is financial flexibility important for the firms capital structure decision? Design/methodology/approach - This paper employs two methods: a questionnaire survey and interviews with chief financial officers (CFOs). The results are used to examine the relation between the firms financial flexibility level and the impact of the global financial crisis on its liquidity, investments, capital structure and business operations. The results are used to analyze the robustness of different financial flexibility measures constructed from the survey data to identify an appropriate financial flexibility measure. Findings - The main finding is that firms with high financial flexibility suffer lower impact from the crisis. The results show that firms with greater internal financing are likely to have lower leverage, higher cash ratios, and suffer a lower impact from the crisis on their business operations. The analysis indicates that an index based on the firms leverage, liquidity, and operating ratios, similar to the Altman Z-score, might be a better financial flexibility measure than long-term debt ratio. The evidence also suggests that financial flexibility is a part of the firms business strategy and is important for its capital structure decisions. Originality/value - A major challenge for researchers is how to measure the firms financial flexibility level, as it is unobservable and difficult to quantify. The innovation of this paper is to directly ask managers about the firms financial flexibility, from both internal and external financing, construct several financial flexibility variables based on the survey data, and examine their correlations with the global financial crisis impact, to identify a robust financial flexibility measure. The research also provides unique data to investigate the value of financial flexibility during a severe credit crisis.

What Companies Need to Know About International Cross-Listing

This article addresses four questions about cross-listing by non-U.S. companies on a U.S. stock exchange: Why do companies cross-list? Does a U.S. listing increase firm value? If so, what are the sources of the increased valuation? And finally, how has the Sarbanes-Oxley Act (SOX) affected the value of a U.S. listing? 2007 Morgan Stanley.

Financial flexibility and the impact of the global financial crisis

Purpose – The purpose of this study is to gain some insights into how managers perceive and achieve financial flexibility and its value in coping with the 2008 global financial crisis. The study focuses on the following questions: What are the sources and measures of financial flexibility? Do financially flexible firms suffer a lower impact from the crisis? Is financial flexibility related to business flexibility? and Is financial flexibility important for the firms capital structure decision?Design/methodology/approach – This paper employs two methods: a questionnaire survey and interviews with chief financial officers (CFOs). The results are used to examine the relation between the firms financial flexibility level and the impact of the global financial crisis on its liquidity, investments, capital structure and business operations. The results are used to analyze the robustness of different financial flexibility measures constructed from the survey data to identify an appropriate financial flexibilit...

Bond Market Access, Credit Quality, and Capital Structure: Canadian Evidence

We examine the impact of bond market access (measured by having a credit rating) on leverage for Canadian high credit quality (HQ) and low credit quality (LQ) firms, and find that the leverage impact is more pronounced for LQ firms. The results are similar for U.S. firms. Our results are confirmed when we control for the firms credit quality, examine the change in leverage around rating initiation, and account for the issue size effect. A similar leverage impact for Canadian and U.S. LQ firms suggests that the Canada-U.S. bond market integration has mitigated the financial constraints for Canadian LQ firms.

Multinational Cost of Capital and Capital Structure

An MNC fi nances its operations by using a capital structure (proportion of debt versus equity fi nancing) that can minimize its cost of capital. By minimizing the cost of capital used to fi nance a given level of operations, fi nancial managers minimize the required rate of return necessary to make the foreign operations feasible and therefore maximize the value of those operations. The specific objectives of this chapter are to: