Document Type

Occasional Paper

Publication Date

2-2008

Abstract

This paper investigates whether Italian companies that cross-list in the United States between 1993 and 2005 show (i) a change in their internal policies as anticipated by the bonding hypothesis, (ii) an increase in market value, or (iii) an increase in the access to capital funds. We use the unique environment created by the 1998 Draghi reform which significantly improved the protection of Italian listed companies’ minority shareholders and we further examine the impact of legislated changes in corporate governance in Italy on the decision of Italian companies to cross-list in the United States.

Our results indicate that following the Draghi reform (i) firms that cross-list in the United States modify their dividend and cash policies as anticipated by the bonding hypothesis. Contrary to prior research, (ii) we do not find evidence that cross-listing serves to enhance shareholder value or (iii) is used as a vehicle to more easily access capital funds either before or after the domestic corporate governance is improved.

The results of this study provide evidence that country level legislative innovations intended to enhance a weak corporate governance system can be a valid and effective substitute to the bonding mechanism by providing an alternative signal of a firm’s quality.

Comments

Working Paper #1043



Included in

Business Commons

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.