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Increasing integration of global financial markets and globalization have contributed to more companies choosing to list their shares on other exchanges outside their domestic market. A cross-listed company offers its stock for trading directly on multiple exchanges, one on a domestic exchange and at least one other exchange located in a foreign market. Baker, Nofsinger, and Weaver (2002) find that international cross-listings on the New York Stock Exchange (NYSE) or London Stock Exchange (LSE) raise investor recognition significantly, while also reducing the cross-listed firm's overall cost of capital.

Cross-listed shares reduce existing market frictions, such as currency or custody requirements, associated with foreign ownership of common stock. For example, consider a U.S. incorporated multinational company that wants to broaden its investor base in Japan. This company could issue shares on the Tokyo Stock Exchange, which would trade in Japanese yen in the home market of Japanese investors, perhaps raising visibility with investors in a new market.

Like depositary receipts, which are described in the next subsection, cross-listed shares are fungible for the same company's shares on another exchange. Unlike a depositary receipt, which represents shares held by a custodian, cross-listings are direct ownership vehicles in the subject company. The local exchange may demand reporting and corporate governance obligations to qualify for trading and comply with local laws and regulations. According to Dobbs and Goedhart (2008), the idea that cross-listings create value is dated because capital markets have become more globalized and integrated. Additionally, trading liquidity in the cross-listed markets often pales in comparison to the primary market's. Therefore, the potential benefits do not justify the costs for compliance with additional exchange rules, notably for companies cross-listing into the United States. In contrast, Roosenboom and van Dijk (2009) conclude that a firm's cross-listing shares on developed market exchanges, such as the NYSE or LSE, do create shareholder value by way of bonding to heightened investor protection laws and increased information disclosure of the developed market. Bonding is the process by which companies located in countries with lax regulation align themselves with more stringent financial disclosure and corporate governance standards by cross-listing onto a developed market exchange.