This thesis examines whether investors value firms’ excess cash holdings differently if they are cross-listed in the US, and whether investors value excess cash of cross-listed firms differently during the GFC from what they do in periods of non-crisis, using data from 24,021 firms across 35 countries over the period 1998 to 2012.
Broadly consistent with expectations, I provide empirical evidence that investors systematically value cross-listed firms’ excess cash at a premium relative to purely domestic firms. Furthermore, this premium is larger for cross-listed firms with exchange-listings, as well as for firms from countries with poor legal protection for investors. Crucially, the evidence suggests that investors’ valuation of excess cash varies depending on the economic climate. During the Global Financial Crisis (GFC), excess cash is generally less valuable for domestic firms. Specifically, a dollar of excess cash is worth $0.22 during the GFC, as compared to $0.65 during non-crisis periods. However, the valuation premium associated with exchange-listings is amplified during the crisis period, reflecting the constraining effect on insiders’ expropriation. In terms of economic magnitude, this “crisis” premium is $0.38 more per dollar of excess cash, or about 20% higher, than the premium assigned in non-crisis periods.