Title

Market segmentation and equity valuation: Comparing Canada and the United States

Publication Type

Journal Article

Publication Date

2008

Abstract

We confirm that Canadian and U.S. equity markets remain segmented and find no evidence that integration is increasing over time. We establish this result by comparing the valuation multiples assigned to the equity of Canadian firms listed exclusively in the home market with a matched sample of U.S. firms over the period 1989–2004. Canadian firms have lower valuations based on multiples of market-to-book, price-to-last 12-month earnings, Tobin's q, and enterprise value-to-EBITDA, despite exhibiting higher sales growth and profitability. Consistent with market segmentation, this Canadian discount is reduced when Canadian firms cross-list on a U.S. stock exchange.

Discipline

Accounting | Corporate Finance | Portfolio and Security Analysis

Research Areas

Financial Performance Analysis

Publication

Journal of International Financial Markets, Institutions and Money

Volume

18

Issue

3

First Page

245

Last Page

258

ISSN

1042-4431

Identifier

10.1016/j.intfin.2006.10.003

Publisher

Elsevier