The Concept and Importance of Cross-Listing

1.The Cross listing is the major requirement which companies need to follow while raising capital from the international market.  It is analyzed that as per the professional accounting firm, cross-listing is considered to be an important part in analysing the market structure and determining the portfolio. It is used to strengthen the corporate governance program.  Cross listing found to be beneficial for both the company and investors point of view in terms of getting the returns from the market. The essay discusses the cross-listing and the understanding I get from the seminar and the discussion done at that time. Learning’s I got from the presentation and cases of cross-listing has been discussed in the essay (Daske, Hail, Leuz & Verdi, 2013).

I have chosen the seminar topic as cross-listing from which I have learned many new aspects about the market. Cross listing is nothing but the concept which is related to the exchanging the domestic stock with the foreign stock in the country. Cross listing can be defined as a process when the firm lists its equity shares on one or more trade exchanges in addition to its domestic exchanges (Bianconi, Chen & Yoshino, 2013). I have considered that by using the cross listing, companies could easily establish and set harmonization in their financial reporting frameworks and maintaining the standards code of conduct in the listing program.

Before doing the research on the topic of cross-listing I consider that it does not make a large part in the financial market and exchanges. According to my knowledge cross-listing is the listing of the company’s common shares on the different stock exchange than its original stock exchange. In other words, we can say that the cross-listing is a narrow concept as it takes into account only the different platforms to exchange the stocks. There is no involvement of a third party (Sarkissian & Schill, 2016). Cross listing has been gaining momentum with the increase in the international business and international listing agreement. After analysing the information, I have found that there are several companies which have indulged in the international listing requirements such as GE capital, JB Hi-Fi Company, Woolworths and Wesfarmers Company. These companies have used the cross listing regulations and compliance programs to strengthen their overall capital raising strategies from the primary and secondary market.

But after doing the research, I analyzed that cross-listing is not at all a narrow concept. The concept of cross-listing is wider in nature and has many aspects to understand in deep. From the analysis, it has been analyzed that the cross-listing is used in gaining the knowledge and experience of the market (Busaba, Guo, Sun & Yu, 2015). Cross listing is used not only a platform for trade exchange but it is a platform or market where buyer and seller meet and exchange their securities or stocks and in lieu of that get the returns from the exchanges done between them. The return earned by them is the difference between the variation and changes in the prices of different countries at the point of time (Daske, Hail, Leuz & Verdi, 2013). After covering the contemporary accounting issue, I found that cross listing is very helpful in complying with the applicable laws and regulations for formulating the reporting of the financial statements of company.

Beyond Narrow Concept: Using Cross-Listing to Gain Knowledge and Experience

From the seminar presentation and discussion of cross-listing, it has been analyzed that the share prices also get affected due to these actions took place in the market. By making use of the cross-listing in the trade exchange the changes also take place in the cost of capital by the company as well as the risk factor also rises (Lin, Hutchinson & Percy, 2015).

The effect of cross-listing is not only shown in the cost and risk factor but other factors also get affected. These factors include the liquidity in the market which affects the cash flows position of the market. As the company uses the cross-listing the funds are overflowed in the market which makes the high liquidity position in the market (Daske, Hail, Leuz & Verdi, 2013). This cross-listing makes the multi-market trading by the company which helps in generating more revenue by them. This makes the company earn more in the market. By using this technique in the market, the price discovery becomes a difficult task for the companies. Due to the effect of cross-listing, determining the share prices becomes a complex task for the market and companies too (Chang, Luo & Ren, 2013).

While doing the research, it has been analyzed that the cross-listing initiates the emerging market and firms. This can be evidence from Indonesia, Mexico, Poland and South Africa. All these nations are able to bring and form their place in the market by using this cross-listing. The concept of cross-listing has been applied in the broader context in the exchange market (Daske, Hail, Leuz & Verdi, 2013).

The learning I got from the seminar presentation and discussion on cross-listing is to increase the level of understanding of the capital and primary market. In examining the issues related to cross-listing includes the accounting and its factors. These accounting factors include the changes in the price of the stock in the market due to its demand and other things. Another accounting issue that has been taken into consideration is the valuation done in the accounting books by the company. This will be considered to be the big issue in cross-listing when recording the entries in the books of accounts (Li, Brockman & Zurbruegg, 2015).

Another phase of the discussion in the seminar is related to whether the cross-listing can be an interesting topic for the non-accounts background people. Before doing the research on this issue, I think that the cross-listing is used only by the people who are from the background of accounting or from any financial backgrounds. The concept of cross listing can only be understood by the people who have knowledge about stock exchange market and belongs to the finance background. 

 But after taking participation in the seminar, I analyzed that not only the accountants are interested in knowing the cross-listing and its advantages. But also, the other people who do not belong to the background of accounts are interested in the cross-listing and exchange trade centers (Date, 2015). The investment in cross listing is done by the non-accountant peoples also as this option is available to all the people present in the market.

Impact of Cross-Listing on Different Factors

There are many reasons due to which many peoples are interested in understanding the cross-listing and its benefits. The biggest advantage, I get by understanding about the cross-listing is that the domestic and foreign market knowledge has been gained by you which help people in making money from the market. In this type of listing, both the foreign and domestic market gets affected which results into the flow of money in the market (Ng, Yong & Faff, 2013).  The main reason of going for the cross listing is that when company wants to strengthen their business then they will have to comply with the all the international stock exchange rules. This will result into the high flow of money in the market which result into the higher productivity.

As there are more places to buy and sell the securities in the market. It makes simple for the investor to invest their funds whenever and wherever they want to. From the analysis of the market, I analyzed that there will more participants in the market and there is always some more time to trade and deal within the stocks irrespective of the different time zone. Another help cross-listing helps in is to raise the more capital as it makes the availability of investors from other markets also and try to give more exposure to the company in expanding and developing them in the market (Boubakri, El Ghoul, Wang, Guedhami & Kwok, 2016). This concept we had discussed above in which the cost of capital is found to be lower for the company. This liberty will enjoy by the company and have more funds in less cost with the idea of investing in the efficient market. Although sometimes, an influence of government has also been seen on the foreign exchange or capital flows in the market (Dodd, 2013). The cross listing of the shares and securities helps organizations to strengthen the value of their scriptures and attracts more investors. In addition to this, it also plays pivotal role in the corporate governance mechanism of the organization.

2.What did I learn about the topic during the seminar, presentations, discussion and case study activities? Can it be applied to a broader context? 

From the above discussion, it can be concluded that cross utilization is nothing but introducing the domestic trade exchange into the foreign market also. This has been done by the companies to increase their revenues from the market and gain a good image. Before doing the research, I consider the cross utilization is a narrower concept which only deals with the different exchange with no use to investor and other parties. But after attending the session on cross utilization, I come to know various important aspects of the cross utilization which plays an important role in the life of the investors to get a high amount of return from the market.

Yes it could be said that this could be applied to a broader context. The cross listing cross-listing is related to getting shares listed on the two or more stock exchange while raising funds on international level. However, after covering contemporary accounting issue, I realised that harmonization in the domestic and international accounting frameworks has impact on the shares of company. I learned that the variation in the prices of the exchanges brings the volume profits and losses to each and every party who are investing their funds once for a while in the market. Use of different accounting rules and differences in the level of market regulation also causes the disparities and changes in the market (Herrmann, Kang & Yoo, 2015). From the information gained in the seminar topic of cross-listing, I got imperative and relevant information which help me to identify the pros and cons of the listing rules and agreements on international level. This information increases my ability, knowledge and understanding to know the means of cross-listing and its importance in the accountant as well as the non-accountant person.

Did I learn anything about myself? Does it affect my understanding of my personal strengths and weaknesses in examining accounting issues? 

Emerging Markets and Firms’ Place in the Market with Cross-Listing

The main thing which I learn about my –self is that I am very good in financial analysis and evaluating the listing rules and regulations on international level. The information gained by me through this seminar makes me eligible and capable to know the strength and weakness of the company and the reason companies are cross utilized their trade exchange in the different market (Huang, Elkinawy & Jain, 2013). I have also strengthen my own ability to understand the cross listing agreements. In addition to this, the major requirement of the cross listing is related to the liquidity of the company. It assists companies to increase their liquidity position and business sustainbitiy in long run (Date, 2015). Another thing which I have learned after understanding the concept of the cross listing is that I could easily invest my capital on international level. However, companies while raising capital on international level and attracting international investors need to get their shares and scriptures registered on the different stock exchanges. In addition to this, the particular code of conducts, policies and corporate governance to comply with the applicable listing rules needs to be followed by these companies as well (Date, 2015). The cross listing of the shares helps company to enter into the primary and capital market.

How can I use the knowledge and experience gained in this unit in the future? 

I could use this knowledge and understanding of the cross listing in my future when I want to raise capital form the international investors. It has helped me to identify the applicable laws and cross listing requirements which helps me to understand the international listing requirements of the companies. This has also helped me to identify the business future sustainability of the companies and which company could give me better outcomes and return on my invested capital.  I have also found that international listing regulations and compliance program is required by company while tapping the international market. In addition to this, if somewhere I want to invest my capital on international level, then by using this knowledge I could identify the sustainbitiy of company and its legal compliance. 

References

Bianconi, M., Chen, R., & Yoshino, J. A. (2013). Firm value, the Sarbanes-Oxley Act and cross-listing in the US, Germany and Hong Kong destinations. The North American Journal of Economics and Finance, 24, 25-44.

Boubakri, N., El Ghoul, S., Wang, H., Guedhami, O., & Kwok, C. C. (2016). Cross-listing and corporate social responsibility. Journal of Corporate Finance, 41, 123-138.

Busaba, W. Y., Guo, L., Sun, Z., & Yu, T. (2015). The dark side of cross-listing: A new perspective from China. Journal of Banking & Finance, 57, 1-16.

Chang, E. C., Luo, Y., & Ren, J. (2013). Cross-listing and pricing efficiency: The informational and anchoring role played by the reference price. Journal of Banking & Finance, 37(11), 4449-4464.

Daske, H., Hail, L., Leuz, C., & Verdi, R. (2013). Adopting a label: Heterogeneity in the economic consequences around IAS/IFRS adoptions. Journal of Accounting Research, 51(3), 495-547.

Date, V. S. (2015). Reporting Year 2015/16 Mandatory Grant Reporting listing relating to the Period 1 July 2015-30 Jun 2016. Health, 21, 10.

Dodd, O. (2013). Why do firms cross-list their shares on foreign exchanges? A review of cross-listing theories and empirical evidence. Review of Behavioural Finance, 5(1), 77-99.

Herrmann, D., Kang, T., & Yoo, Y. K. (2015). The impact of cross-listing in the United States on the precision of public and private information. Journal of International Business Studies, 46(1), 87-103.

Huang, Y., Elkinawy, S., & Jain, P. K. (2013). Investor protection and cash holdings: Evidence from US cross-listing. Journal of Banking & Finance, 37(3), 937-951.

Li, S., Brockman, P., & Zurbruegg, R. (2015). Cross-listing, firm-specific information, and corporate governance: Evidence from Chinese A-shares and H-shares. Journal of Corporate Finance, 32, 347-362.

Lin, T., Hutchinson, M., & Percy, M. (2015). Earnings management and the role of the audit committee: an investigation of the influence of cross-listing and government officials on the audit committee. Journal of Management & Governance, 19(1), 197-227.

Ng, Y. H., Yong, H. H. A., & Faff, R. (2013). The long-and short-run financial impacts of cross listing on Australian firms. Australian Journal of Management, 38(1), 81-98.

Sarkissian, S., & Schill, M. J. (2016). Cross-listing waves. Journal of Financial and Quantitative Analysis, 51(1), 259-306.