Based on the Legal Bonding Hypothesis, proposed by Coffee and Stulz (1999), cross-listing firms can rent a stringent US regulatory regime to improve shareholder protection. However, the reputation bonding hypothesis, put forth by Siegel (2005), questions the efficacy of enforcing US law on cross-listing firms and instead suggests that firms use cross-listing to build a good reputation in the credit market so that they can survive through economic downturns. In order to differentiate between these two arguments, I analyze corporate risk taking after cross-listing. An Increase in minority shareholder protection implied by the legal bonding hypothesis predicts an increase in corporate risk taking due to less private benefits for insiders after cross-listing. Whereas, according to reputation bonding, firms will be more conservative to maintain a good reputation in the credit market. I find a significant increase in R&D expenditure and significant decline in capital expenditure after cross-listing. These findings suggest a shift from low-risk investment toward more risky investment which provides support for the legal bonding hypothesis.
","abstract_html":"<p>Based on the Legal Bonding Hypothesis, proposed by Coffee and Stulz (1999), cross-listing firms can rent a stringent US regulatory regime to improve shareholder protection. However, the reputation bonding hypothesis, put forth by Siegel (2005), questions the efficacy of enforcing US law on cross-listing firms and instead suggests that firms use cross-listing to build a good reputation in the credit market so that they can survive through economic downturns. In order to differentiate between these two arguments, I analyze corporate risk taking after cross-listing. An Increase in minority shareholder protection implied by the legal bonding hypothesis predicts an increase in corporate risk taking due to less private benefits for insiders after cross-listing. Whereas, according to reputation bonding, firms will be more conservative to maintain a good reputation in the credit market. I find a significant increase in R&D expenditure and significant decline in capital expenditure after cross-listing. These findings suggest a shift from low-risk investment toward more risky investment which provides support for the legal bonding hypothesis.</p>","abstract_has_math":false,"creators":["Tavazoei, Masoud"],"institution":null,"degree_name":"M.S.","degree_level":"Campus Access Thesis","degree_discipline":"Moore School of Business","degree_department":null,"school":null,"contributors":["Steven V Mann"],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2012,"date_issued":"2012-01-01T08:00:00Z","date_published":"2012-01-01T08:00:00Z","updated_at":"2026-07-24T04:38:37Z","subjects":["Business","Business Administration, Management, and Operations","ADR","corporate governance","corporate risk taking","cross-listing"],"languages":[],"rights":["© 2012, Masoud Tavazoei"],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"https://scholarcommons.sc.edu/etd/476","outbound_label":"Repository record","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Steven V Mann"]},{"key":"dc:creator","label":"Author","values":["Tavazoei, Masoud"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"thesis:degree_discipline","label":"Discipline","values":["Moore School of Business"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Campus Access Thesis"]},{"key":"thesis:degree_name","label":"Degree Name","values":["M.S."]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["Business","Business Administration, Management, and Operations","ADR","corporate governance","corporate risk taking","cross-listing"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:rights","label":"Dc Rights","values":["© 2012, Masoud Tavazoei"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["https://scholarcommons.sc.edu/etd/476"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["Based on the Legal Bonding Hypothesis, proposed by Coffee and Stulz (1999), cross-listing firms can rent a stringent US regulatory regime to improve shareholder protection. However, the reputation bonding hypothesis, put forth by Siegel (2005), questions the efficacy of enforcing US law on cross-listing firms and instead suggests that firms use cross-listing to build a good reputation in the credit market so that they can survive through economic downturns. In order to differentiate between these two arguments, I analyze corporate risk taking after cross-listing. An Increase in minority shareholder protection implied by the legal bonding hypothesis predicts an increase in corporate risk taking due to less private benefits for insiders after cross-listing. Whereas, according to reputation bonding, firms will be more conservative to maintain a good reputation in the credit market. I find a significant increase in R&D expenditure and significant decline in capital expenditure after cross-listing. These findings suggest a shift from low-risk investment toward more risky investment which provides support for the legal bonding hypothesis.
"]},{"key":"dc:title","label":"Title","values":["Cross-Listing and Corporate Risk Taking: Legal Bonding or Reputation Bonding"]}]}],"canonical_facts":{"dc:contributor":["Steven V Mann"],"dc:creator":["Tavazoei, Masoud"],"dc:description.abstract":["Based on the Legal Bonding Hypothesis, proposed by Coffee and Stulz (1999), cross-listing firms can rent a stringent US regulatory regime to improve shareholder protection. However, the reputation bonding hypothesis, put forth by Siegel (2005), questions the efficacy of enforcing US law on cross-listing firms and instead suggests that firms use cross-listing to build a good reputation in the credit market so that they can survive through economic downturns. In order to differentiate between these two arguments, I analyze corporate risk taking after cross-listing. An Increase in minority shareholder protection implied by the legal bonding hypothesis predicts an increase in corporate risk taking due to less private benefits for insiders after cross-listing. Whereas, according to reputation bonding, firms will be more conservative to maintain a good reputation in the credit market. I find a significant increase in R&D expenditure and significant decline in capital expenditure after cross-listing. These findings suggest a shift from low-risk investment toward more risky investment which provides support for the legal bonding hypothesis.
"],"dc:identifier":["https://scholarcommons.sc.edu/etd/476"],"dc:rights":["© 2012, Masoud Tavazoei"],"dc:subject":["Business","Business Administration, Management, and Operations","ADR","corporate governance","corporate risk taking","cross-listing"],"dc:title":["Cross-Listing and Corporate Risk Taking: Legal Bonding or Reputation Bonding"],"thesis:degree_discipline":["Moore School of Business"],"thesis:degree_level":["Campus Access Thesis"],"thesis:degree_name":["M.S."]},"updated_at":"2026-07-24T04:38:37Z"}