University of Virginia Legal Working Paper Series
University of Virginia John M. Olin Program in Law and Economics Working Paper Series
Lemon Signaling in Cross-Listing
Abstract
This paper develops a signaling model of private benefits of control and applies it to the decision to cross-list. It suggests that cross-listing signals that a manager or a controlling shareholder can not extract large amounts of private benefits.
This signaling effect creates opposite incentives for managers and controlling shareholders. While the opportunity to bond and signal limited extraction encourages managers to cross-list, it discourages controlling shareholders from cross-listing, since such a signal decreases the control premium they receive if they sell their control block.
The paper derives implications for the cross-listing market, the desirability of international regulation and the likelihood of international convergence of corporate law and structures.
Since this paper is the first to develop a signaling model of private benefits, it also has implications for other issues in corporate law and corporate finance such as the desirability of mandatory corporate law and dividend distribution.
Subject Area
Law and Economics
Recommended Citation
Michal Barzuza,
"Lemon Signaling in Cross-Listing"
(February 2008).
University of Virginia Legal Working Paper Series.
University of Virginia John M. Olin Program in Law and Economics Working Paper Series.
Working Paper 40.
http://law.bepress.com/uvalwps/olin/art40
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