International cross-listing and price discovery under trading concentration in the domestic market: Evidence from Japanese shares

• Speed of price discovery for Japanese stocks cross-listed in New York is compared.
• The proposed method enables to compare the size of information.
• Information is incorporated more quickly during New York trading hours.
• The size of information is larger during Tokyo trading hours.
• The speed of price discovery is correlated with liquidity measures.

This study examines the role for the Tokyo and the New York Stock Exchange in price discovery for Japanese shares. A structural approach is employed to investigate the efficiency and contribution in price discovery separately. We find that the speed of incorporating information into prices is faster in New York than in Tokyo. Three approaches are taken to control the size of information and confirm that New York is the efficient side in information assimilation. We also find that the observable liquidity measures such as trade frequency, bid–ask spread, volume per trade and return variance, explain the price discovery efficiency.