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Global Liquidity Provision and Risk Sharing

Published online by Cambridge University Press:  01 July 2020

Feng Jiao  and
Sergei Sarkissian Open the ORCID record for Sergei Sarkissian [Opens in a new window]
Feng Jiao
Affiliation:
University of Lethbridge Dhillon School of Businessfeng.jiao@uleth.ca.
Sergei Sarkissian*
Affiliation:
McGill University and University of Edinburghsergei.sarkissian@mcgill.ca
*
sergei.sarkissian@mcgill.ca (corresponding author)
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Abstract

We examine liquidity-related characteristics of U.S. firms with cross-listed shares in 20 foreign markets in the 1950–2013 period. We find that firms after foreign-market listing exhibit lower liquidity sensitivity and lower liquidity beta and suffer less from transitory price shocks. These results are stronger when firms are listed on multiple exchanges and in larger and more liquid markets. The liquidity enhancement is associated with firms’ increased foreign ownership postlisting and is effective for firms with high levels of volatility, foreign income, and foreign trading and a high probability of informed trading. Our findings provide support for global markets providing liquidity and reducing liquidity risk to U.S. firms.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 5 , August 2021 , pp. 1844 - 1876
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Patrick Augustin, Hendrik Bessembinder (the editor), David Schumacher, Akiko Watanabe, Ethan Watson, and Shaojun Zhang, as well as the participants of the 2015 China International Conference in Finance (CICF), 2015 Financial Management Association Meeting, and 2018 Northern Financial Association Annual Meeting for their useful comments. Jiao acknowledges financial support from the Institut de Finance Mathématique de Montréal (IFM2) and the National Bank of Canada. Sarkissian acknowledges financial support from the Social Sciences and Humanities Research Council (SSHRC).

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