Equity Cross Listings in the US and the Price of Debt

Question 1

What is the main research question?

Answer 1

Do non-U.S. firms benefit from lower debt costs and better bond access after listing equity on a U.S. exchange?

Question 2

What are the two main hypotheses tested? (2)

Answer 2

• Bonding & Information Hypothesis (greater governance/transparency)
• Liquidity & Visibility Hypothesis (easier access, investor familiarity).

Question 3

What are the key findings of the study? (2)

Answer 3

• After U.S. equity cross-listing, firms issue more bonds and at lower yields, especially in public and foreign markets
• Benefits strongest for exchange listed firms over OTC or Private ones

Question 4

What is the paper’s empirical identification strategy? (2)

Answer 4

• OLS regressions with firm, industry, and year fixed effects
• pre/post comparisons also used

Question 5

How is cost of debt measured in the paper?

Answer 5

Bond yield-to-maturity at issuance for fixed-rate bonds from global databases (Thompson Deals, Mergent FISD).

Question 6

What types of firms are in the dataset?

Answer 6

24,000+ firms from 46 countries (1992–2012), 5,467 firm-years with bond yield data, mix of exchange, OTC, and private listing types.

Question 7

How do debt effects differ by bond type? (2)

Answer 7

• Public and foreign bond issuance and yields respond strongly
• Private placements show no significant changes.

Question 8

Why are U.S. listings valuable for bondholders? (3)

Answer 8

• Increase transparency
• Reduce monitoring costs
• Allow enforcement through U.S. legal channels (e.g., class action lawsuits).

Question 9

How does home-country institutional quality affect the results? (2)

Answer 9

Benefits stronger when home countries have:
- low private benefits of control
- high debt enforcement efficiency

Question 10

How does Sarbanes-Oxley affect the results? (2)

Answer 10

• Stronger debt market benefits pre-SOX (before 2002)
• Compliance costs post-SOX reduce attractiveness of cross-listing.

Question 11

What role does information asymmetry play? (2)

Answer 11

• Public/foreign bondholders benefit from reduced asymmetry via exchange listing
• Insiders like banks already have private access.

Question 12

Why don’t private placements show the same benefits? (2)

Answer 12

• Private lenders use bespoke monitoring and covenants
• U.S. listing has less impact on information asymmetry.

Question 13

What is the ‘bonding hypothesis’ in this context?

Answer 13

Cross-listings serve as a commitment to higher standards, but can’t fully substitute for weak home institutions in debt markets.

Question 14

How do cross-listed firms change bond issuance behavior? (2)

Answer 14

• More public and foreign bonds issued post-listing, at lower yields
• Domestic/private issuance largely unchanged.

Question 15

What agency problems may offset benefits?

Answer 15

Cross-listings can increase equity-favoring risk-taking, which raises the cost of debt despite improved governance.

Question 16

How does the “visibility” channel work? (2)

Answer 16

• Listing raises investor awareness and bond demand
• Potentially lowering yields via broader investor base and better liquidity.