Agency Problem Essay

26378 Words Feb 4th, 2016 106 Pages
Emerging Markets Review 13 (2012) 516–547

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Emerging Markets Review journal homepage: www.elsevier.com/locate/emr

Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis☆
G. Andrew Karolyi ⁎
Johnson Graduate School of Management, Cornell University, 348 Sage Hall, Ithaca, NY 14853, USA

a r t i c l e

i n f o

Article history:
Received 30 June 2011
Received in revised form 6 August 2012
Accepted 7 August 2012
Available online 17 August 2012
JEL classification:
F30
G15
G32
G38
Keywords:
Cross-listing
Stocks
Bonding
International financial markets

a b s t r a c t
Why firms from around the world seek to
…show more content…
Similar choices are made by many firms targeting other popular destination markets for secondary listings, like the London Stock Exchange, NYSE Euronext (Europe),
Deutsche Börse, Hong Kong, and Singapore.
Why do firms choose to cross-list their shares abroad? Surveys of corporate managers that have successfully secured cross-listings for their firms cite a wide variety of benefits. Among the most popular include better access to a larger, deeper market for capital, greater diversification of their ownership base, and a more liquid trading environment for their shareholders (Bancel and Mittoo, 2001, 2008; Fanto and Karmel, 1997; Mittoo,
1992). Managers also report that concerns about the additional regulatory and disclosure burdens associated with foreign cross-listings represent the most important costs that inhibit firms. Whatever their reasons, firms have sought opportunities by listing their shares on overseas markets for decades and in great numbers. Indeed, according to the World Federation of Stock Exchanges (WFE) in 2010, over 3000 firms from around the world are secondarily listed as a foreign firm on over 40 major stock

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