Why are Foreign Firms Listed in the U.S. Worth More?

Craig Doidge, G. Andrew Karolyi, Rene M. Stulz

NBER Working Paper No. 8538
Issued in October 2001
NBER Program(s):Asset Pricing Program, Corporate Finance Program

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.

download in pdf format
   (221 K)

email paper

A non-technical summary of this paper is available in the February 2002 NBER Digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8538

Published: Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February. citation courtesy of

Users who downloaded this paper also downloaded* these:
Reese, Jr. and Weisbach w8164 Protection of Minority Shareholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings
Doidge, Karolyi, and Stulz w13079 Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices Over Time
Stulz w7021 Globalization of Equity Markets and the Cost of Capital
Karolyi and Stulz w8994 Are Financial Assets Priced Locally or Globally?
Benos and Weisbach w10224 Private Benefits and Cross-Listings in the United States
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us