The impact of cross listing on shareholder's return : an empirical study of Canadian mining companies cross listed on the Frankfurt Stock Exchange

Abstract

This paper tests the impact of cross-listing on Canadian mining firm’s shareholder’s return. An event study is used to test abnormal return following the announcements of cross-listing event on the Frankfurt stock exchange. Cumulative Abnormal return around the cross-listing date is used as a proxy to test this impact. 31 Canadian firms that are cross-listed on the Frankfurt stock exchange are collected through the period of 1989-2003 for this study. Canadian stocks react negatively to cross-listing on Frankfurt stock exchanges around the cross-listing date, at the 5% significance level. However over a relative long period Cross-listing in the Frankfurt stock exchange showed a less negative market reaction. Both reactions are however not significant. The test results support findings of previous studies that cross-listing provides some sort of benefit especially over time. Therefore, Canadian firms considering cross-listing on the Frankfurt stock exchange as a way to add value for its shareholders’ should consider it despite the Canadian market reaction to this decision. This is because cross-listing provides many other benefits as highlighted in our literature review that on the long run will affect its share-price and thus shareholders return.