Regional financial Integration in Africa: Cross-listings as a form of regional financial integration

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Chapter 1.3., REASONS FOR DOMESTIC MARKETS AND FIRMS TO PARTICIPATE IN CROSS-LISTING:
Academic literature has identified a number of different reasons which motivate local markets and firms to cross-list. For example, firms and domestic markets cross-list in order to expand their investor base, increase stock liquidity, improve the terms on which they can raise capital, increase visibility of stock exchanges, and achieve non-financial benefits such as increasing their customer base through the broadening of product recognition among investors of the host country. In addition, cross-listings enrich and strengthen each individual exchange by the addition of quality-level listed securities.
1.3.1, Expand Investor Base:
Cross-listings in a foreign market make the domestic market available to more investors and, consequently increase the shareholder base and risk sharing, which results in higher valuations. Foerster and Karolyi provide empirical support to this perception, namely that cross-listing increases market value by expanding the shareholder base and improving liquidity. In support of this notion, Canadian managers whose firms are cross listed in the U.S. place greater emphasis on the role of cross-listings in widening their shareholder base. As cross listings increase the shareholder base, the market s risk is shared among more shareholders and this increased diversification reduces the market s cost of capital. Baker reports that the major benefit of foreign listing is to broaden the shareholder base. It is depicted that cross-listings increase the investor base of the stock market with beneficial effects on its cost of capital. Cross-listings help to draw the interest of new investors and encourage them to start trading in both foreign and local markets. The interest may come not only from the larger scope of corporate information available after listing overseas, but also from a signal of commitment to higher governance standards which a

Moses W Chisadza is a lawyer who has worked for the University of Fort Hare as a Tutor in Jurisprudence and Property law courses. In 2012/2013 he was selected as a recipient of highly competitive Australian Aid scholarship to study a unique LLM programme in International Trade, Investment and Business Law in Africa at the University of the Western Cape. Moses holds a specilised LLM degree in International Trade, Investment and Business Law in Africa from the University of the Western Cape (South Africa), an LLB from the University of Fort Hare (South Africa), and a Certificate of Proficiency from the Cape Law Society, a Certificate in Practical Legal Training from the East London School of Legal Practice: Law Society of South Africa. His research fields are International Finance and Financial Markets Regulations, Stock market development International trade, Investment and Business law.