International Equity Markets Capstone Project

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International Equity Markets

Advantages and disadvantages of cross listing on stock exchanges

When a company lists its stock exchange on many stock exchanges in different countries, it is referred to as cross listing. It entails exchanging in more than one country. However, a company can list its stocks on two stock exchanges in the same country. The administration is likely to be widened besides the generation of great pool of possible investors. In most cases, companies employ the common form of cross listing whereby they launch a primary listing in the country of origin before initiating a secondary listing in a foreign country. This happens when a business is pursuing to go global. For instance, an Australian firm expanding in the U.S. And seeks to reflect this in the best way (Dobbs & Goedhart, 2010).

The major reason of cross listing is to avail stock to many people across the world. Evidently, a business might bank more money by issuing new stocks. In addition, it increases the stock liquidity, which gives the business owners high flexibility in terms of stake ownership. Another benefit of cross listing is that it pushes companies to abide by the listing requirements of different countries. This makes companies appear more trust worthy and reliable to potential investors. Particularly, this is a great advantage to businesses based in environments where the government requires minimal information in public flotation. Therefore, companies are motivated to adhere to the toughest requirements of for instance; the U.S. can enhance its global credibility (Youxing, 2009).

Cross listing has a number of minor benefits. First, a company might benefit from double the chances of attracting media coverage. Another advantage is that cross listing provides the ease of acquiring a foreign firm in deals where payment is done in the form of stock exchange rather than cash. The cross listing of a company can choose the alternative of issuing stock manifested as bonuses to employees who work in relevant countries (Rubery, 2007).

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Cross listing has a few inherent drawbacks. Most of then revolve around the need to penetrate the process of flotation twice while meeting two different sets of continuing procedures and requirements. For a company, this gene rates surplus costs in terms of international administration and direct spending (Perry, 2010). For a company, which is not financially stable or properly established, the process of listing in the second business might generate a surplus scrutiny level causing problems. Most companies intending to enter the market have raised concerns such as the ongoing process and the actual costs involved in listing. The costs of listing come from professional fees and sponsor, marketing, and advertising expenses accompanied by other offers for sale, initial fees required by the Listing Authority, and annual duties paid to the Exchange (Bragg, 2009).

Issues involved in raising capital in the global market

With the ongoing uncertainty across the global economy, it has become challenging to raise capital for most corporations because liquidity has been suppressed. In order to identify the financial instruments and geographical conducive to raise capital, it is imperative to gauge the dynamics of the financial industry.

Liquidity concerns: the global liquidity has been fluctuating abruptly thus having a major impact on the economic growth and financial stability. While the sovereign debt crisis spread across major countries of the world, there is a high possibility of a looming second credit crisis. The resulting sovereign downgrading and unsustainable debt levels by rating organizations cause a spike in the interest rates of the sovereign. This leads to an increase in the overall expenses of corporate funding. In this environment, banks risk aversion hence tight liquidity conditions (Rubery, 2007).

Funding is increasingly becoming important across the global fund raising industry. Therefore, raising funds has proven to be stable courtesy of domestic investors. Different regions have been increasing their share within the global market. Because global investors are expected to maintain or increase their allocations to interested….....

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