When Deciding Whether to Cross-List Shares on a Foreign Exchange

When deciding whether to cross-list shares on a foreign exchange, the firm has to consider the expected benefits and costs. The benefits may be: to establish a broader investor base for its stock, to establish name recognition in foreign capital markets, thus paving the way for the firm to source new equity and debt capital from investors in different markets, and to expose the firm's name to a broader investor and consumer groups. The costs include: listing fees, reconciliation of the accounting standards of two countries, compliance with the regulations of the foreign exchange, and investor relations.
-Assume that Accor shares are trading at A$2.5 in Sydney and $28 in New York.Each ADR equals 20 shares.The current exchange rate is A$1.5/$.In the absence of transaction costs,can you make an arbitrage profit?

Correct Answer:

Verified

Yes.Buy one ADR in New York fo...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free