Cross-listing, capital structure and firm performance: A simultaneous equation estimation

Abstract

This paper investigates the relationship between cross-listing, capital structure and performance jointly for non-US firms cross-listed in the US. Using a sample of 703 companies over the period ranging from 1980 to 2019, we show a simultaneous significant effect of cross-listing on capital structure and performance and find bi-directional causality between the two later variables. Cross-listed firms issue more equity and exhibit better valuation. The legal bonding associated with the reasons for cross-listing finds its support. Firms that originated from a poor legal environment issue more equity and exhibit better performance when they cross-list their shares in the US, given that they better protect minority shareholders’ interests. Our results were robust to the use of several control variables.