The Market Reaction to secondary listings: Evidence from selected companies listed on the Johannesburg Stock exchange.

This study examines the effects associated with the issuing of cautionary announcements of intent in pursuing a secondary listing on foreign stock exchanges for companies with primary listings on the Johannesburg Stock Exchange (JSE). It investigates whether secondary listing benefits a company, whether it enhances shareholder value, and whether the findings are consistent with those of previous studies. The market reaction to secondary listing announcements is analysed using event study methodology. Abnormal returns are calculated using the market model, with an event period of 61 days and an estimation period of 90 days. A sample of 29 secondary listings by JSE-listed companies that obtained secondary listings between 1998 and 2013 are analysed, including the effects of these secondary listings on overall shareholder value, by sector (whether resource-based or non-resource-based), and by continent. The analyses reveal negative cumulative abnormal returns over the event period for the sample of 29 secondary listings, positive returns for secondary listings by non-resource companies, negative returns for secondary listings by resource companies, and negative returns by continents – except for Africa, which shows positive abnormal returns over the event peri.