Canadian market reaction to Canadian firms' cross-listing on European stock exchanges

Abstract

This paper tests how the Canadian stock market reacts to Canadian firms’ cross-listing on European stock exchanges. Sixty-four Canadian firms that are cross-listed are collected through the period of 2001-2012. Most of the sample firms belong to the natural resource industry. An event study is used to test abnormal return following the cross-listing announcements. Canadian market showed a negative reaction to cross-listing in Europe around announcement date at the 10% significance level. Cross-listing in London got better market reaction than on other European stock exchanges. However this difference is not significant. The test results supported findings of previous studies that the investor protection provided by cross-listing is most valued by market. Market reaction should not be the main motivation for Canadian firms when making cross-listing decisions. However, if other benefits and costs are the same for cross-listing on different destinations, a company should choose destinations like U.S. or London which will result in a more positive market reaction.