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Yale School of Management 1 Emerging Market Finance: Lecture 12: Why Listing Overseas?

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Presentation on theme: "Yale School of Management 1 Emerging Market Finance: Lecture 12: Why Listing Overseas?"— Presentation transcript:

1 Yale School of Management 1 Emerging Market Finance: Lecture 12: Why Listing Overseas?

2 Yale School of Management 2 Why Listing Overseas? Raising capital at lower costs of capital  More liquid and deeper foreign markets  Larger investor base (willing to pay more) Increased visibility for products and brand  More press coverage at home after foreign listing  More press coverage in country of listing

3 Yale School of Management 3 Why Listing Overseas (cont.) Employee motivation  Employee stock options for foreign employees  Better recognition by foreign employees

4 Yale School of Management 4 Growth in Global Investing Vehicles ADRs comprise 11% of US trading in 200` 1998 US$ volume in Telebras ($81b), Ericsson ($31b), Nokia ($28b), Telemex ($24b) Over 50 DRs with US$ volume over $2b in 1998 DCX is new global share certificate; NYSE proposal for 12 more issues in 1999 US-based ADR Trading Total Number of ADR Listings

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6 6 Hargis and Ramanlal (1996)

7 Yale School of Management 7 Various Major Exchanges (Saudagaran and Biddle 1995)

8 Yale School of Management 8 Characteristics of Listings (same paper)

9 Yale School of Management What has been the experience with overseas listing? Well, depends on country and industry!

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12 此处加入其它页 (东方航空公 司, Telmex, 等例子) China Eastern Airlines on NYSE 昨天的交易量 Trading volume

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16 Yale School of Management Factor 1 : Frequency of news announcements, and/or media appearance Explaining Differences in Foreign Listing Experience

17 Yale School of Management On average , China Eastern issues about one announcement a month

18 Yale School of Management Whereas by mid-day today, there are 14 news items on IBM, 6 of which from IBM

19 Yale School of Management Research shows The more frequent a company’s name shows in media, the higher its stock trading volume and its P/E. Ads have similar effect

20 Yale School of Management 20 Explaining Difference in Foreign Listing Experience Factor 2: firms with more products sold overseas will be more likely to succeed Examples: Infosys, Sony, Daimler Benz, General Motors

21 Yale School of Management 21 Factor 3: Culture and Proximity Canadian firms like to list on NYSE and NASDAQ, and enjoy good valuations Telmex has high trading volume and good valuation

22 Yale School of Management 22 Big Hurdles for Foreign Stocks In Finland, Swedish-speaking investors invest more in firms with Swedish-speaking CEOs. ==== Cultural bias (Grinblatt & Keloharju 1997) Investors’ local bias: prefer local stocks (Coval & Moskowitz 1999, Huberman 2001)

23 Yale School of Management 23 Investors’ home country bias Amount invested in foreign stocks by individual investors

24 Yale School of Management 24 Example: P/E Ratios for Chinese Firms: where do they get higher valuation?

25 Yale School of Management 25 Factor 4: Company Size Large firms find it easier to get high valuation and high liquidity overseas Saudagaran (1988)

26 Yale School of Management 26 Factor 5: Foreign Exposure Firms with more foreign employees find it easier to list overseas and enjoy high valuation

27 Yale School of Management 27 Factor 6: Higher Disclosure Standards (same paper)


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