Yale School of Management
1
Emerging Market Finance:
Lecture 12: Why Listing Overseas?
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
Yale School of Management
3
Why Listing Overseas (cont.)
Employee motivation
Employee stock options for foreign employees
Better recognition by foreign employees
Yale School of Management
4
Growth in Global Investing Vehicles
0200400600800
1000120014001600
1991
1992
1993
1994
1995
1996
1997
1998
Total Private DRs Public DRs
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1992 1993 1994 1995 1996 1997 1998S
ha
res
(m
illio
ns
)
• 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
Yale School of Management
5
Yale School of Management
6
Hargis and Ramanlal (1996)
Yale School of Management
7
Various Major Exchanges (Saudagaran and Biddle 1995)
Yale School of Management
8
Characteristics of Listings (same paper)
Yale School of Management
What has been the experience with overseas listing?Well, depends on country and industry!
Yale School of Management
Yale School of Management
Yale School of Management
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
Yale School of Management
13
Yale School of Management
14
Yale School of Management
15
Yale School of Management
Factor 1：
Frequency of news announcements, and/or media appearance
Explaining Differences in Foreign Listing Experience
Yale School of ManagementOn average， China Eastern issues about one announcement a month
Yale School of ManagementWhereas by mid-day today, there are 14 news
items on IBM, 6 of which from IBM
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
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
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
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)
Yale School of Management
23
Investors’ home country bias
2%
13. 30%21. 50%
15%
0%
20%
40%
60%
80%
100%
U. S. J apan UK Germany
Amount invested in foreign stocks by individual investors
Yale School of Management
24
Example: P/E Ratios for Chinese Firms:where do they get higher valuation?
60.4
22.6 22.5
5.8
0
25
50
75
Shanghai Hong Kong New York Singapore
Yale School of Management
25
Factor 4: Company SizeLarge firms find it easier to get high valuation and
high liquidity overseas
Saudagaran (1988)
Yale School of Management
26
Factor 5: Foreign Exposure
Firms with more foreign employees find it easier to list overseas and enjoy high valuation
Yale School of Management
27
Factor 6: Higher Disclosure Standards (same paper)
