Vagabond shoes longing to stray: Why foreign firms list in the United States

How do firms that go public decide whether to list on a major stock exchange or locally? Using a unique data set on Israeli IPOs in the US and Tel Aviv, we show that companies that list in the US are young and overwhelmingly high-tech oriented. We argue that high-quality innovative firms are willing to incur additional costs associated with listing in the US in order to reveal their value and distinguish themselves from firms that issue stock back home. Costs of listing in the US include first day underpricing and relinquishing corporate control. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: G1; G15; G32.