The determinants of trading volume distribution: Evidence from globally cross-listed stocks

• We study volume distribution of global cross-listings between home and host markets.
• Our sample includes 771 cross-listings on 10 host markets between 1981 and 2010.
• We identify two new information-based variables: common language and legal origin.
• We correct for biases caused by ignoring multiple cross-listings.
• We document the significance of various market- and firm-level variables.

This paper documents the global trading volume distribution of cross-listed stocks and examines factors that make a host market competitive in attracting order flows between host and home markets. We hand-collect a sample of 642 cross-listed firms in 10 host countries with 771 cross-listings from 39 home countries between 1981 and 2010. We document that, for the first time, whether a host market shares the language or legal origin with the home markets has significant impact on attracting order flows. We also find that host markets are more successful in attracting trading volume when they have a higher information factor, have lower bid-ask spreads, provide better investor protection and information disclosure, and are closer to the home market. Additionally, small but mature high-tech firms with high growth rate, volatile stock returns and high foreign sales are prone to execute more trading in host markets.