The development of emerging stock markets and the demand for cross-listing

• How are the local stock-market development and the cross-listing activity linked?
• We propose a non-monotonic model that builds on mixed previous evidence.
• We provide evidence for 14 European emerging markets.
• Cross-listing first gains and then loses popularity as the local market develops.

This study provides new insights into the link between local stock-market development and the demand for cross-listing. Analyzing 14 Central and Eastern European stock markets over two decades, we find that the link is non-monotonic: cross-listing activity first grows and then decreases as the local market develops. We support that country-level finding with firm-level evidence on non-monotonic preferences to issue and terminate depositary receipt programs. The results have important policy implications and they shed new light on the competitiveness and prospects of local stock markets in emerging economies.