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Cross Border Listing

Companies whose shares trade both on their home country's stock exchange and on another country's stock exchange

What is Cross Border Listing?

Cross border listing involves companies that trade on the stock exchange of the country where it belongs, and are also listed on the stock exchange in other countries such as the New York Stock Exchange (NYSE) and NASDAQ. Cross Border Listing gives rise to the possibility of arbitrage opportunities, as these are two assets that are theoretically the same but are trading in two different markets.

 

Cross Border Listing - Global Map Connected

 

We can say basically that cross-border listed companies are those that operate in countries outside the United States that opt to be listed on US-based stock exchange markets and other large exchange markets all over the world.

For example, a China-based company is listed on the Shanghai Stock Exchange because it is its home market. When it applies for cross-listing on the NYSE and gets approved, then it will now be able to trade its shares with American companies and other members of the NYSE for as long as it meets the requirements and follows the regulations that govern companies that trade in the US.

However, getting listed in the more famous markets entails meeting the requirements that are set for all members of any given stock market, including information on its number of shareholders and policies. Though there’s been no evidence of cross-board listing affecting the performance of a company, several companies claim that their visibility and value have been enhanced.

 

Benefits of cross-border listing

Because of the benefits of being cross-border listed, more and more companies are getting themselves listed on stock exchange markets based outside of their home countries. Here are more benefits of such a move.

 

1. Gains exposure and access to more capital

Cross-border listed companies are able to access more markets, where there are also more players and a lot more time to trade, considering that these stock markets are usually in different time zones. With this, there is a better chance to raise capital because the company gets more exposure in the market.

 

2. Helps in improving a company’s structure of corporate governance

Cross-border listings often require companies to establish a clear and well-defined set of rules that govern its corporate structure. It means that it must be open regarding its operations and allows a functioning governing structure to be in place to help identify the company’s directions and goals.

The process is also long and tedious. At the beginning of designing the company’s structure of corporate governance, its environment is scrutinized, and its strengths and weaknesses are evaluated, which involves outside entities like an accounting firm and law firms, among others.

 

3. Attracts more and better talents

Every company needs good talents or front-liners in order to perform well in the stock market and in serving its customers. In a cross border listing, the company becomes more exposed to the market, which increases its chance to attract excellent talents from all over the world.

Also, being cross-border listed requires a company’s Equity Incentive Plan to be more lucrative than those of companies that are not, which helps it create a pool of hardworking and great talents.

 

4. Makes the cross-border listed company more highly competitive

With better talents working for a company, it is bound to perform better in the stock market, which results in consistently high share prices, as well as easy access to large amounts of capital.

 

5. Improves the reputation of a company

Opting for a cross border listing and making it to the NYSE and other stock exchange markets in the US and around the world is already a big win. That is why it can be used as an advertising strategy for cross-border listed companies to attract foreign investors.

In addition, because of its existing well-designed corporate governance structure, the company can easily provide information to investors and be transparent about it works.

Also, major media corporations monitor the more famous stock markets such as the NYSE, London Stock Exchange, and Tokyo Stock Exchange, to name a few. Getting media exposure definitely boosts a company’s image and brand value, making it more highly credible.

 

More resources

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

  • Dow Jones Industrial Average (DJIA)
  • Eurex Exchange
  • Japan Exchange Group
  • Nasdaq Composite

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