Why do firms cross-list their shares on foreign exchanges? A review of cross-listing theories and empirical evidence

Purpose – Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firm's shares on a foreign exchange. Nevertheless, a significant number of firms continue to cross-list every year. This paper examines the recent cross-listing trends and reviews the literature on motives to cross-list. Design/methodology/approach – The literature review includes a summary of theoretical studies grouped into cross-listing theories including market segmentation, liquidity, investor recognition, information disclosure, legal bonding, proximity preference and business strategy theories, and also includes a discussion of testable implications and empirical evidence for each of the above mentioned cross-listing theories. Findings – An extensive cross-listing literature offers a number of theories on the motives to cross-list that in most cases complement each other by encompassing different aspects of the complex cross-listing behavior. Nevertheless, continuous market developments, such as significant regulatory and technological changes in the ways capital markets operate, raise new questions on why firms cross-list and call for further research to continue.