FOREIGN-LISTING: A STRATEGY FOR IMPROVING PERFORMANCE FOR FIRMS FROM EMERGING ECONOMIES

Abstract

This study examined the exposure of cross-listed firms to market risk and its impact on the firm's stock return for firms from emerging economic group cross-listed on the London Stock Exchange. The study sought to determine if there is a negative asymmetry risk exposure on stock returns and a spillover effect of the economic policy uncertainty from the U.S. impacting negatively on the stock returns of the cross-listed firms. In carrying out the analysis, secondary data was used by collecting individual firms daily stock prices from Bloomberg database to determine firms monthly stock returns while the economic policy uncertainty index was downloaded from www.policyuncertianty.com. The period of analysis spanned from year 2000 to 2020 and the Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroskedasticity (DCC-GARCH) model was employed for analysis. Based on findings economic policy uncertainty is a major source of structural breaks that has a detrimental effect on the overall performance of firms from the emerging economic group of countries. Therefore, firms from the emerging group of countries must consider the stability and volatility in their proposed listing market before deciding to list in a foreign market.

Keywords: Cross-listing, Economic Policy, Uncertainty, Structural Breaks, Stock Returns