Product market bonding and cross-listings: evidence from global competition law reforms

Abstract

We propose and empirically test a product market motive for cross-listing, positing that intensified competition in domestic markets incentivizes firms to cross-list their securities as a strategic response to mitigate the adverse impact of heightened competition at home. Utilizing a hand-collected comprehensive cross-listing dataset covering 56 home countries and 45 cross-listing host countries, along with a novel measure of competition law reforms that intensify product market competition in firms’ home countries, our study provides robust evidence supporting this hypothesis. We find that firms are more likely to cross-list their securities following the implementation of competition law reforms in their home countries. Additional analyses suggest that cross-listing facilitates firms in gaining a deeper understanding of foreign product markets, signaling their commitment to delivering superior products, and enhancing product/brand awareness in foreign countries. Importantly, we demonstrate that cross-listing positively influences foreign sales, underscoring its efficacy as a strategic tool for bolstering a firm’s presence in foreign product markets amid heightened domestic competition. Overall, our study identifies a strategic product market motive for cross-listing and offers actionable insights for firms to enhance market positioning in an increasingly competitive global marketplace.