The statistical data shows an average rise of 97% in trade volume of shares, as well as an 8.5% rise in share prices, of companies registered both on the US and the Tel Aviv stock exchanges, in contrast to prices and trade volumes of the same shares at the time they were traded on the US stock exchange only. These are the findings of the study preformed by the ISA. The study was carried out by Prof. Shmuel Hauser, who until the end of 2005 was the ISA’s chief economist and Ms. Rita Yankelevitch from the ISA’s Economic Department.
In the year 2000 the Securities Law has been amended to encourage dual listing of Israeli companies, listed on large US stock exchanges, to register on the Tel Aviv Stock Exchange. This amendment exempts Israeli and other companies, registered for trade on large US stock exchanges, from reporting to the Israel Securities Authority in addition to their reporting requirements in the US. If not for this amendment to the Securities Law the companies traded on the US stock exchange would have been required to submit a prospectus to the ISA, to acquire a publishing permit, to submit periodic and immediate reports, in accordance with the Israeli law, to the Israeli GAAP, etc.
Following the aforesaid amendment, 30 out of more then 100 Israeli companies traded on NASDAQ – decided to register their shares for trade on the TASE.
During the research Hauser and Yankelevitch had examined the influence of dual listing on the price and liquidity of shares. Their work is based on the sampling of 30 companies that decided to register for trade on the TASE, following the easements provided by the Law. The uniqueness of this study stems from two main characteristics:
– Contrary to what is customary on other capital markets , where companies first issue their shares on the local market and then move onto foreign markets, the Israeli companies had first issued their shares in the US and then in Israel;
– Contrary to other studies that previously examined this issue, this listing requires only the notification of the TASE regarding the company’s request to register for trade on the stock exchange and provides exemption from prospectus’ publishing and the burden of reporting in Israel, for the aforesaid companies it therefore results in low costs of registration on the TASE. All of the aforesaid allows examining this issue while it is free from the burdening costs of registration on several stock exchanges, which in many cases is characteristic for such registrations. This can also explain the contradictory findings of other studies according to which there are no mandatory superfluous returns following dual listing.
In one of the studies published abroad, the researchers had surveyed European managers on the subject of costs vs. advantages regarding dual listings in foreign countries. The main finding was in 60% of the surveyed replying that – the benefits of dual listing are superior to costs related to registration. In the opinion of the surveyed, the main advantage stems from the rising in trade volume of the share and from improved disclosure. However, the researchers had found that, at times the influence over the rate of shares is negative. The researchers also found that, in the eyes of the aforesaid managers, the increased liquidity had an obvious influence on the benefits derived from dual listing and that it increased where the dual listing was on the capital market with stricter disclosure requirements.
In light of the aforesaid, the assumption that dual listing is advantages for both companies and investors was examined. The advantage is expressed in the increased trade volume and rate of shares. The main findings are that shares registered for dual trading had enjoyed a 90% growth in their trade volume – the fact which is correct for both TASE and NASDAQ. Also, following dual registration, the rates of the aforesaid shares went up by about 8.5% on average in the US.
Prof. Shmuel Hauser and Ms. Rita Yankelevitch are presently engaged in examining whether the Israeli market is more dominant then the American in its influence over the dual listed shares.
