Cross‐listing and firm liquidity on the stock exchange of Hong Kong

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Abstract
Outlines the reasons why increasing numbers of firms list their shares on more than one stock exchange, previous research on the effects of cross‐listing and inter‐ and intra‐day liquidity patterns. Describes the market making system of the stock exchange of Hong Kong and compares 1996‐1997 data on a sample of 33 Hong Kong firms cross‐listed in London with a control sample. Finds the cross‐listed firms have lower trading volumes, higher absolute bid‐ask spreads but lower relative ones and higher average dollar depth. Uses regression techniques to investigate liquidity and presents the results which confirm that cross‐listed firms are more liquid with lower relative spreads and higher depths even after controlling for differences in price, volume, return variance and intertemporal patterns.