INTERNATIONAL LISTINGS OF STOCKS - THE CASE OF CANADA AND THE UNITED-STATES

The globalization of financial markets has seen everincreasing numbers of firms choosing to list their stocks on foreign exchanges. We examine whether the extent of economic and financial market integration (or segmentation) between a firm's home country and listing country influences stock price reaction by examining the case of two ''similar'' countries: the U.S. and Canada. During the 100 days before the week of interlisting in the U.S., (risk-adjusted) stock prices of Canadian firms rise (on average) by over 9.4 %, rise by an additional 2 % around the interlisting date, but follow with a corresponding drop of 9.7 % in the 100 days after interlisting. We interpret this evidence to be consistent with the financial market segmentation between Canada and the U.S. However, a subsample of Canadian resource firms does not exhibit these stock price effects, suggesting industry-related factors may also be an important determinant of integration. We also find average trading volume in interlisted stocks more than doubles in the months following interlisting.