ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm's Information Environment and Increase Market Value?

This paper investigates the relation between cross listing in the United States and the information environment of non-U.S. firms. We find that firms that cross list on U.S. exchanges have greater analyst coverage and increased forecast accuracy than firms that are not cross listed. A time-series an...

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Bibliographic Details
Published in:Journal of accounting research 2003-05, Vol.41 (2), p.317-345
Main Authors: Lang, Mark H., Lins, Karl V., Miller, Darius P.
Format: Article
Language:English
Subjects:
Analytical estimating
Analytical forecasting
Business structures
Capital costs
Earnings forecasting
Estimate reliability
Forecasting models
Investors
Modeling
Statistical forecasts
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Summary:This paper investigates the relation between cross listing in the United States and the information environment of non-U.S. firms. We find that firms that cross list on U.S. exchanges have greater analyst coverage and increased forecast accuracy than firms that are not cross listed. A time-series analysis shows that a change in analyst coverage and forecast accuracy occurs around cross listing. We also document that firms that have more analyst coverage and higher forecast accuracy have higher valuations. Furthermore, the change in firm value around cross listing is correlated with changes in analyst following and forecast accuracy, suggesting that cross listing enhances firm value through its effect on the firm's information environment. Our findings support the hypothesis that cross-listed firms have better information environments, which are associated with higher market valuations.
ISSN:0021-8456
1475-679X
DOI:10.1111/1475-679X.00106