Impact of Financial Crisis on Cross Listing Indian Corporate: An Empirical Study

Abstract

Global financial crisis in 2008 emerged as huge problem in India. Indian Companies have been allowed to tap the global market through cross listing. The study examines the impact on returns, liquidity and volatility of the underlying domestic stocks due to cross listing during financial crisis period. The sample of the study comprises of 235 Indian companies which went for international listing on New York Stock Exchange (NYSE), National Association of Securities Dealers Automatic Quotation (NASDAQ), London Stock Exchange (LSE) and Luxemburg Stock Exchange (LXSE) over the period 1^st January, 1991 –31^st December, 2014. Out of 203 Indian sampled companies, 87 companies consist of pre financial crisis period while 116 companies consist of post financial crisis period. Various statistical tools like regression, ARCH models, turnover ratios, variance ratios etc. have been used for examining the impact of cross listing on domestic stocks return, liquidity and volatility.

Even in global financial crisis period bifurcation, when crisis period considered separately during pre-listing, listing day and post listing period of the underlying domestic stocks, it is found that in long term, a negative and significant change on return of underlying domestic stocks after cross listing while in short term, positive immediate effect has been shown on returns. Liquidity significantly declined after financial crisis while volatility has no significant impact due to global crisis. One probable reason for our empirical findings may be that Indian stock markets are not efficiently integrated as compare to developed markets. Overall results support investor recognition theory. Indian corporates, investors and regulators of stock market mainly get benefit from the results of the study.