Ownership of Cross-Listed Equities: An Investigation of Turnover, Diversification, and Risk

Using data for a sample of Malaysian stocks that are traded in both Malaysia and Singapore, we show that the turnover rate (trading volume relative to shares held) is significantly higher in the foreign market than in the domestic market. We also find that ownership of cross-listed shares by foreign investors is not motivated by diversification benefits. Instead, we find that the proportion of a firm's shares held in Singapore is directly related to the firm's level of systematic risk. Copyright 2003 Eastern Finance Association.