Cross-Listing and Corporate Governance: Bonding or Avoiding?

This paper questions the bonding hypothesis on cross-listing - namely, the idea that firms may want to list on a foreign stock market with a view to renting that market's superior corporate governance system. All too often, cross-listing studies are oblivious to the special structure of the U.S. regulatory regime, which governs foreign issuers. This paper highlights these features and provides a comprehensive survey of the extant empirical evidence. A critical review of this evidence reveals that an opposite, "avoiding hypothesis" more aptly describes firms' cross-listing behavior with regard to corporate governance issues. If anything, more stringent regimes deter issuers, and there is evidence that insiders behave opportunistically with regard to the cross-listing decision.