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

question 23

Essay

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?

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Definitions:

Equity Theory

A theory that suggests that employees are motivated by fairness in the workplace and will adjust their input level to match their perception of fair treatment.

Job Inputs

The resources, effort, and time an employee contributes to their work tasks.

Job Outcomes

The results or end-products of one's work, including achievements, performance levels, and contribution to organizational goals.

Direct Experience

Knowledge or skills gained through first-hand involvement or activity, as opposed to information learned through others.