We examine the contribution of cross-listings to price discovery for a sample of Canadian stocks listed on both the Toronto Stock Exchange (TSE) and a U.S. exchange. We ¢nd that prices on the TSE and U.S. exchange are cointegrated and mutually adjusting. The U.S. share of price discovery ranges from 0.2 percent to 98.2 percent, with an average of 38.1 percent. The U.S. share is directly related to the U.S. share of trading and to the ratio of proportions of informative trades on the U.S. exchange and the TSE, and inversely related to the ratio of bid-ask spreads.WITH THE ENHANCED GLOBALIZATION of ¢nancial markets, the number of non-U.S. ¢rms cross-listing shares on a U.S. exchange has substantially increased. Attracting non-U.S. listings is now a top priority of the U.S. stock exchanges. At the end of 2000, 420 non-U.S. ¢rms were listed on the New York Stock Exchange (NYSE).The number of foreign ¢rms listed on Nasdaq was even higher.The popularity of international cross-listings has prompted many academic studies on the topic. 1 Most of these studies focus on the bene¢ts of international cross-listings, including the reduced cost of capital and the enhanced liquidity of a ¢rm's stock.Studies such as Alexander, Janakiramanan (1987, 1988) and Foerster and Karolyi (1993) suggest that the cost of capital declines because the portion of the risk premium that compensates for cross-border investment barriers dissipates. Miller (1999) and Foerster and Karolyi (1999) propose increased investor recognition as another possible explanation. Several studies examine changes in trading volume and costs due to international cross-listing. Foerster and Karolyi (1998) ¢nd that the bid-ask spreads in Canada decrease after the cross-listing of Canadian stocks in the United States. Domowitz, Glen, and Madhavan (1998) suggest that the impact of cross-listing is complex and depends on the degree of quote transparency, that is, the extent to which price information is observable in the two markets. Smith and So¢anos (1997) examine if cross-listing is a zerosum game, with increased trading in the United States being o¡set by reduced THE JOURNAL OF FINANCE VOL. LVIII, NO. 2 APRIL 2003 n Eun is at Georgia Institute of Technology and Sabherwal is at the University of Rhode Island. We thank Rick Green (the editor), Ajay Khorana, Cli¡ord Lee, Henry Oppenheimer, Stephen Sapp, and Steve Smith for helpful comments and Shih-Ching Jeng for research assistance. We are especially grateful to an anonymous referee for detailed and insightful comments. All errors are our own.1 Karolyi (1998) provides a useful survey of international cross-listing. 549trading in the home market. They ¢nd that the home-market value of trading increases substantially after foreign ¢rms list on the NYSE. The aforementioned studies, however, have not addressed the following important question: Do international cross-listings of stocks contribute to the price discovery of these stocks? One objective of this study is to examine the extent to which the U.S. stoc...

This study examines the role that chief executive officer (CEO) overconfidence plays in an explanation of international mergers and acquisitions during the period 2000–2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we find that CEO overconfidence is related to a number of critical aspects of international merger activity. Overconfidence helps to explain the number of offers made by a CEO, the frequencies of nondiversifying and diversifying acquisitions, and the use of cash to finance a merger deal. Although overconfidence is an international phenomenon, it is most extensively observed in individuals heading firms headquartered in Christian countries that encourage individualism while de-emphasizing long-term orientation in their national cultures.

The alignment between a firm's business and information technology (IT) strategies continues to be important for research and practice. Prior research investigating the performance consequences of strategic IT alignment (SITA) has produced inconsistent results. This paper distinguishes between two roles of SITA: (1) as a state of congruence between business and IT, which is the primary focus of empirical studies, and (2) as reflecting a capability that may enable or inhibit the leveraging of IT investments, as has been discussed theoretically but not examined empirically. Based on the resource-based view (RBV), IT investment (ITI) is explicitly included as the resource that SITA as a capability can inherently help leverage. Also based on RBV, we argue that environmental uncertainty, which is examined in terms of dynamism, complexity, and munificence, moderates the effect of SITA on the relationship between ITI and firm performance. The research model is tested through panel-data analyses of data from 1999-2008, including 758 firm-year observations from 242 firms. This study is the first to find that SITA as a state directly improves firm performance even when considering ITI and its interaction with SITA. Moreover, the effect of the interaction between SITA and ITI on firm performance increases with an increase in environmental dynamism or complexity and with a decrease in environmental munificence. We also find that the effect of the interaction between SITA and ITI can be negative under some environments. Specifically, the results suggest that (1) in dynamic, complex, and hostile environments, SITA does reflect a capability that enhances the positive effect of ITI on firm performance, but (2) in stable, simple, and munificent environments, SITA reflects a rigidity that reduces the positive effect of ITI on firm performance. The results are robust under a variety of statistical specifications and estimations.

The importance of knowledge management (KM) processes for organizational performance is now well recognized. Seeking to better understand the short-term impact of KM on firm value, this article focuses on public announcements of information technology (IT)-based KM efforts, and uses cumulative abnormal return (CAR) associated with an announcement as the dependent variable. This article employs a contingency approach, arguing that the KM announcement would have a positive short-term impact on firm value in some conditions but not in others. Thus, it pursues the following research question: What are the effects of contextual factors on the CAR associated with the announcement of an IT-based KM effort? Specific hypotheses are proposed based on information-processing theory, organizational learning theory, the knowledge-based theory of the firm, and the theory of knowledge creation. These hypotheses link CARs to alignment between industry innovativeness and the KM process, alignment between firm efficiency and the KM process, firm-specific instability, and firm diversification. The empirical study utilizes secondary data on 89 KM announcements from 1995 to 2002. The results largely support the hypotheses. Overall, this article provides empirical support for the theory-based arguments, and helps develop a contingency framework of the effectiveness of KM efforts.

This study extends the literature on the information content of stock message boards. To better understand the effect of online postings on trading activities and reduce the error due to stocks with small message board followings, we examine stocks with no fundamental news and high message posting activity. Such stocks tend to be of small firms with weak financials. For those stocks, we find a two-day pump followed by a two-day dump manipulation pattern among online traders, which suggests that an online stock message board can be used as a herding device to temporarily drive up stock prices. We also find that online traders' credit-weighted sentiment index, but not the number of postings, is positively associated with contemporaneous return and negatively predicts the return next day and two days later. Also, absolute sentiment is negatively related with contemporaneous and next day's intraday volatility and positively related with the proportion of volume in small-sized trades. We conclude that message board sentiment is an important predictor of trading-related activities.

This study tests for the international presence of dividend catering across a sample of twenty-three countries. We find evidence of catering among firms incorporated in common law countries but not for those in civil law nations. Catering persists even after controlling for the effect of the firm's lifecycle. We conclude that when the legal regime and its accompanying set of investor protections permit, investors force dividends from managers, but they also attempt to extract such payouts indirectly by placing a high value on dividend paying firms. The relative failure of civil law firms to cater might be explained by idiosyncratic behaviors in the consumption of the private benefits of control or a lack of interest in responding to temporary market misevaluations of their equity.

This paper provides empirical evidence on the level of trading activity in the stock options market prior to the announcement of a merger or an acquisition. Our analysis shows that there is a significant increase in the trading activity of call and put options for companies involved in a takeover prior to the rumor of an acquisition or merger. This result is robust to both the volume of option contracts traded and the open interest. The increased trading suggests that there is a significant level of informed trading in the options market prior to the announcement of a corporate event. In addition, abnormal trading activity in the options market appears to lead abnormal trading volume in the equity market. This finding supports the hypothesis that the options market plays an important role in price discovery.

Recent studies on the business impacts of information technology (IT) have examined these impacts in the context of either other organizational resources or contingency factors. In this study we integrate these perspectives to develop a contingent interaction model. This model examines how a firm’s IT investment interacts differently with resources focusing on creating value (i.e., R&D) and resources focusing on value appropriation (i.e., advertising), depending on the environmental turbulence in the firm’s industry. The results indicate that a firm’s IT interacts differently with other organizational resources depending on (a) the resource’s focus on value creation through innovation or value appropriation in the market; and (b) the extent of turbulence in the firm’s industry. Thus, managers should consider IT’s interactions with other resources while making IT investments. In turbulent and stable environments, managers should seek ways to use IT to complement R&D investments and advertising investments, respectively. Managers should also recognize that IT may erode some of the benefits of R&D and advertising investments in stable and turbulent environments, respectively. They should therefore exercise caution when making concurrent investments in IT and R&D in stable environments and exercise similar caution when making concurrent investments in IT and advertising in turbulent environments.