Cross border listing involves companies that trade on the stock exchange of their home country and also on a stock exchange in another country. A Cross Border Listing gives rise to the possibility of arbitrage opportunities, as identical assets are trading in two different markets.
Cross border listed companies are frequently those based in countries outside the United States that opt to also be listed on a US-based stock exchange.
For example, a China-based company is listed on the Shanghai Stock Exchange because that is its home market. When it applies for cross-listing on the NYSE and gets approved, then its shares can easily be traded by US investors. The company must, of course, meet the exchange’s listing requirements, just like any other company.
Getting listed on the larger world exchanges, such as the London exchange, entails meeting the requirements that are set for all members of the market, including information on the number of shareholders and policies. Several companies claim that their visibility and value have been enhanced through cross border listing.
Benefits of Cross Border Listing
Because of the benefits of being cross-listed, more and more companies are getting themselves listed on stock exchange markets based outside of their home countries. Here are the benefits of such a move.
1. Gain exposure and access to more capital
Cross-listed companies are able to access more potential investors, which means access to more capital. Their stock may also gain more attention by being traded in more than one part of the world. With this, there is a better chance to raise capital because the company gets more exposure in the market.
2. Help in improving a company’s structure of corporate governance
Cross-listings often require companies to establish a clear and well-defined set of rules that govern its corporate structure. This means that it must be open regarding its operations. Many cross-listed companies improve their governing structure that guides the company’s directions and goals.
3. Attract more and better talent
Every company needs good talent or front-liners in order to perform well in the stock market and in serving its customers. With a cross border listing, the company gains exposure, increasing its chances of attracting top talent.
Also, being cross-border listed requires a company’s Equity Incentive Plan to be more lucrative than those of companies that are not. This helps it create a pool of hardworking and devoted talent.
4. Improves the reputation of a company
Opting for a cross border listing on the NYSE or other major exchanges enhances a company’s public profile. It can be used as an advertising strategy for cross-border listed companies to attract foreign investors.
Major media corporations monitor the more famous stock markets, such as the NYSE, London Stock Exchange, and Tokyo Stock Exchange. Getting additional media exposure can boost a company’s image and brand value.
Thank you for reading CFI’s guide on Cross Border Listing. To keep learning and developing your knowledge of the financial world, we highly recommend the additional resources below: