The value of excess cash and corporate governance: Evidence from US. cross-listings
Publication typeWorking paper
Publication Number of pages55
MetadataShow full item record
AbstractWe examine whether and, if so, how a U.S. cross-listing mitigates the risk that managers will squander corporate cash holdings. We find strong evidence that the value investors attach to excess cash reserves is substantially larger for foreign firms listed on U.S. exchanges and over the counter than for their domestic peers. Further, we show that this excess-cash premium stems not only from the strength of U.S. legal rules and disclosure requirements designed to safeguard investors’ money, but also from increased monitoring by financial analysts and large investors. Overall, since investors’ valuation of excess cash mirrors how they expect the cash to be used, our analysis shows that a U.S. listing constrains managers’ inefficient allocation of corporate cash reserves significantly.
Knowledge Domain/IndustryAccounting & Finance