Foreign Institutional Ownership and Cross-Listing

Although foreign institutional ownership (FIO) is generally considered as an important outcome of international cross-listings, much of the prior research ignores the iterative nature of FIO – that is, FIO may also serve as a key determinant of cross-listings. Using a comprehensive dataset of international cross-listings for firms from 58 countries, we examine the effect of FIO on firms’ cross-listing decision. Our results suggest that firms with a larger proportion of FIO before a firm’s cross-listing decision tend to exhibit significantly higher propensity to cross-list in foreign stock exchanges than firms with a smaller proportion of FIO. Further analyses show that the positive association between FIO and cross-listings is weaker for firms with a better information environment, as evidenced by higher analyst following, high media coverage, having a Big 4 auditor, and the issuance of management earnings forecasts. Additional evidence shows that having FIO from countries with more developed institutions exhibit a stronger effect on firms’ decision to cross-list. These results are consistent with the argument that the presence of foreign institutional investors in a firm facilitates firms’ international cross-listing decision