Using a comprehensive set of cross-listings, we extend the bonding hypothesis by developing what we term as the ?relative bonding hypothesis. We hypothesize that firms seek the advantages of stronger investor protections by listing in countries whose governance is relatively better than its own. This means that firms can achieve bonding without listing in the U.S and that the governance advantages of bonding are not only for ADRs. We find that firms are more likely to choose a cross-listing destination if the host country has better governance than the home country, except those firms from countries whose managers enjoy greater private benefits of control. We also find that there is valuation premium even when cross-listing occurs ?outside of the U.S. The premia are even stronger if the host country has better governance than that of the home country. We conclude that although bonding might explain the existence of ADRs, relative bonding helps to explain the extensive cross-listing which occurs outside of the U.S.
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