Effect on Security Prices and Volatility from Cross Listing within the GCC Markets

The literature on foreign firms listing their equity in the US is extensive. This paper extends research in this area by looking at the experience of firms engaging in cross listing across the regional GCC equity markets. The primary objective for firms to pursue cross listing is to lower their cost of capital. Arguably the sources of cost of capital reduction are numerous and include, reducing the barriers of segmented markets, greater visibility across different markets, the need to adhere to extended legal and regulatory regimes that can improve corporate governance systems and provide enhanced protection to a larger set of stakeholders, and greater transparency can reduce monitoring costs. Parametric tests show that on average there is a run up in prices leading up to the listing date, this however is reversed quickly in the days following the cross listing. Non parametric results generally support this conclusion. There is also weak evidence that the variability in returns experience a decline across the event period.