Impact of International Cross-listing on Local Exchanges: Evidence from Chile

This article examines the impact of international cross-listings on local stock exchanges by focusing on the experience of Chile. First, we analyse the consequences to the domestically traded shares of a sample of Chilean companies that undertook ADR listings. Our findings show that there is no indication of order-flow migration from the domestic market following cross-listings. There is, however, evidence that in the aftermath of cross-listings trading becomes concentrated in the ADR market. There is also some indication of an increase in the base-level price volatility of the underlying stock series following cross-listings. Second, we study the changes in Chile's local stock market vis-à-vis the ADR market. We observe that the increase in the size and liquidity of the domestic stock exchange is overshadowed by the rapid growth of the ADR market. From a policy perspective, the continued rise in the number of companies undertaking international cross-listings can cause the local stock markets to become secondary role players relative to the major foreign exchanges, thus affecting domestic financial development.