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The value of excess cash and corporate governance: evidence from U.S. cross-listings

Abstract : We examine whether and how a US cross-listing mitigates the risk that insiders will turn their firm's cash holdings into private benefits. We find strong evidence that the value investors attach to excess cash reserves is substantially larger for foreign firms listed on US exchanges and over-the-counter than for their domestic peers. Further, we show that this excess-cash premium stems not only from the strength of US legal rules and disclosure requirements, but also from the greater informal monitoring pressure that accompanies a US listing. Overall, because investors' valuation of excess cash mirrors how they expect the cash to be used, our analysis shows that a US listing constrains insiders' inefficient allocation of corporate cash reserves significantly.
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Contributor : Antoine Haldemann Connect in order to contact the contributor
Submitted on : Wednesday, November 17, 2010 - 3:54:52 PM
Last modification on : Saturday, June 25, 2022 - 10:51:29 AM





Laurent Fresard, Carolina Salva. The value of excess cash and corporate governance: evidence from U.S. cross-listings. Journal of Financial Economics, 2010, 98 (2), pp.359-384. ⟨10.1016/j.jfineco.2010.04.004⟩. ⟨hal-00537080⟩



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