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Cross-listing decisions and the foreign bias of investors

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  • Dodd, Olga
  • Frijns, Bart

Abstract

We show that two major puzzles in financial economics, the home bias puzzle in international equity allocations and the choice of destination market for cross-listing, are related. In particular, the level of cross-listing activity from the home market to a foreign market is strongly positively related to the degree of over-/under-investment of the home market investors in that particular foreign market, after controlling for other potential explanations of cross-listing decisions. This finding suggests that corporate managers, when making a cross-listing decision, may be prone to the same behavioral/familiarity bias as investors, and both puzzles may in fact be the same.

Suggested Citation

  • Dodd, Olga & Frijns, Bart, 2015. "Cross-listing decisions and the foreign bias of investors," Finance Research Letters, Elsevier, vol. 15(C), pages 160-166.
    • Handle: RePEc:eee:finlet:v:15:y:2015:i:c:p:160-166
    DOI: 10.1016/j.frl.2015.09.006
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    Cited by:

    1. Cheng, Cheng & Schwienbacher, Armin, 2016. "Venture capital investors and foreign listing choices of Chinese companies," Emerging Markets Review, Elsevier, vol. 29(C), pages 42-67.
    2. Kong, Xiangting & Ng, Jeff & Tsang, Albert & Yan, Shuo, 2024. "Foreign institutional ownership and Cross-Listing," Journal of International Money and Finance, Elsevier, vol. 140(C).
    3. Yang, Ann Shawing & Carandang, Craig Alan Uyan, 2017. "Exploring the location and price differentials of cross-listed firms for arbitrage opportunities," Finance Research Letters, Elsevier, vol. 21(C), pages 85-91.
    4. Maxime MERLI & Antoine PARENT, 2022. "Portfolio Diversification During the Belle Époque: When the Actual Portfolios of French Individual Investors Met Behavioral Finance," Working Papers of LaRGE Research Center 2022-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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    More about this item

    Keywords

    Foreign bias; Cross-listing; Familiarity bias;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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