TY  - JOUR
AU  - Doidge,Craig
AU  - Karolyi,G. Andrew
AU  - Stulz,Rene M.
TI  - Why are Foreign Firms Listed in the U.S. Worth More?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8538
PY  - 2001
Y2  - October 2001
UR  - http://www.nber.org/papers/w8538
L1  - http://www.nber.org/papers/w8538.pdf
N1  - Author contact info:
Craig Doidge
University of Toronto
105 St. George St.
Toronto, Ontario M5S 3E6
Canada
E-Mail: craig.doidge@rotman.utoronto.ca

Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
Columbus, OH 43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - At the end of 1997, the foreign companies listed in the U.S. have a Tobin's q ratio that exceeds by 16.5% the q ratio of firms from the same country that are not listed in the U.S. The valuation difference is statistically significant and largest for exchange-listed firms, where it reaches 37%. The difference persists even after controlling for a number of firm and country characteristics. We propose a theory that explains this valuation difference. We hypothesize that controlling shareholders of firms listed in the U.S. cannot extract as many private benefits from control compared to controlling shareholders of firms not listed in the U.S., but that their firms are better able to take advantage of growth opportunities. Consequently, the cross-listed firms should be those firms where the interests of the controlling shareholder are better aligned with the interests of other shareholders. The growth opportunities of cross-listed firms will be more highly valued than those of firms not listed in the U.S. both because cross-listed firms are better able to take advantage of these opportunities and because a smaller fraction of the cash flow of these firms is expropriated by controlling shareholders. We find that our theory explains the greater valuation of cross-listed firms. In particular, we find expected sales growth is valued more highly for firms listed in the U.S. and that this effect is greater for firms from countries with poorer investor rights.
ER  -