Do Non-U.S. Firms Issue Equity On U.S. Stock Exchanges to Relax Capital Constraints?

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Abstract
The number of non-U.S. firms listing their equity on U.S. stock exchanges has increased dramatically. While non-U.S. firms may seek U.S. listings for a variety of reasons, we focus on one often-mentioned motive, namely, that a U.S. listing enhances access to external capital markets. We document that the sensitivity of investment to cash flow decreases significantly for firms from emerging capital markets, but does not change for developed markets firms following a U.S. listing. A large proportion of the listing firms from both emerging and developed markets explicitly state the importance of access to external capital markets in their annual reports, but emerging market firms mention this need more frequently. Further, we find that firms access international capital markets more often following a U.S. listing and, consistent with our other results, this increase is more pronounced for firms from emerging markets. Overall, our findings suggest that greater access to external capital markets is an important benefit of a U.S. stock market listing, especially for emerging market firms.