Market reaction to international listing: Case of African companies listed on the London Stock Exchange

  • Meryem HAKKOU Faculty of Economics and Management, Ibn Tofail University of Kenitra, Morocco
  • Cheklekbire MALAININE Faculty of Economics and Management, Ibn Tofail University of Kenitra, Morocco

Abstract

This article examines the market reaction to dual stock listing. Little attention is given to African companies listed on international markets, which are the subject of our study. The sample consists of only twelve (12) African companies from five different countries that are simultaneously listed on their home stock exchanges and the "main market" of the London Stock Exchange. Using an event study methodology, which involves estimating the so-called "normal" profitability and abnormal profitability, the study assesses a market model for each company in our sample using daily returns and a market-capitalization-weighted index for each country's market. The market model parameters are initially estimated for the period before the event, ranging from -240 days to -30 days with an estimation window of 61 days (-30 days, +30 days) around the IPO date, including the event day (j0). The effect of foreign listing on the home market remains positive and significant, explained by a legal framework offering better protection and a broader shareholder base. Simultaneously, foreign listing is considered a positive initiative for the selected companies and their shareholders overall. In conclusion, the stock price reaction is linked to the choice of the stock exchange and the economic situation of the host country.

Keywords: foreign listing, emerging market, market reaction, stock prices, stock profitability, abnormal profitability.

JEL Classification: M13, M15, O32

Type of article: Empirical Research

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Published
2024-02-11
How to Cite
HAKKOU, M., & MALAININE, C. (2024). Market reaction to international listing: Case of African companies listed on the London Stock Exchange. International Journal of Accounting, Finance, Auditing, Management and Economics, 5(2), 161-176. https://doi.org/10.5281/zenodo.10647035
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Articles