Investor communication and the benefits of cross-listing

Cross-listing shares abroad can reduce barriers to foreign investment, such as frictions to information flows and limited minority shareholder protection, resulting in capital market benefits for firms. While a large body of literature has sought to explain the consequences of cross-listing, little attention has been paid to the role of communication between managers and investors during this process.1 In this paper, I investigate whether managers change communication policies around a U.S. cross-listing. I then test whether these investor communication practices around cross-listing are associated with the capital market benefits documented by previous literature, such as increased Tobin's q and lower cost of capital. Lastly, I explore two potential reasons that may lead managers to choose higher levels of communication when they cross-list: to support an increase in investor recognition and to facilitate external monitoring. Managers choose to cross-list their firms? stock to achieve greater foreign investor recognition, enhanced stock perfor While studies have sought to explain the benefits of cross-listing, little attention has been paid to the role of communication between managers and investors during this process. In this paper, I investigate whether managers change communication policies around U.S. cross-listings. I document significant increases in communication when firms cross-list. I then test whether these investor communication practices around cross-listing are asso-ciated with capital market benefits. I find that cross-listed firms that communicate more with investors experience greater and longer lasting cross-listing benefits. Lastly, I explore two potential reasons that may lead managers to choose higher levels of communication: to support an increase in investor recognition and to facilitate monitoring. I find results consistent with communication increasing visibility and scrutiny, suggesting that communication functions as a supporting tool to achieve managers' cross-listing goals. (c) 2020 Elsevier B.V. All rights reserved.