The Valuation Effects of Cross-Listing Abroad for Irish Firms

The number of Irish firms cross-listed on international exchanges remains low, relative to other countries. However, as a proportion of those firms eligible to list, Irish firms are, relative to others, more likely to list abroad. Surprisingly, Doidge, Karolyi and Stulz (2004) show that in 1997 US exchange-traded Irish firms are worth less than domestic Irish firms, a result at odds with what we might have expected and with the predictions of the legal bonding hypothesis. In this paper, I show that listing abroad, in both London (AIM listing only) and the US (both Level 1 and Level 2), does enhance the value of Irish firms. I find that cross-listing leads to an average ‘within-firm’ change in the value of Level 2 firms in the region of 19.65 per cent (using market-to-book of assets). As expected, the change in value experienced by Level 1 firms is smaller (14.93 per cent). Like Doidge, Karolyi and Stulz (2009), I do not find that an ordinary listing in London enhances value. Surprisingly, I find that Irish firms that trade on the Alternative Investment Market (AIM) in London experience the largest valuation gains from listing abroad of all cross-listed Irish firms (27.35 per cent using market-to-book of assets). This is surprising since these firms are subjected to the least onerous governance and regulatory requirements of all cross-listed Irish firms. Ultimately, due to data restrictions, I am unable to delve further into why the less regulated AIMfirms enjoy a larger cross-listing premium relative to Level 2 firms. However, I offer some possible explanations consistent with some findings in the international cross-listing literature