Bertasiute Kamile F 2016R

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Running head: THE IMPACT OF CROSS-LISTING ON THE VALUE OF HIGH-TECH

COMPANIES
THE IMPACT OF CROSS-LISTING ON THE VALUE OF HIGH-TECH COMPANIES
A Thesis
Presented to the Faculty of Finance Programme
at ISM University of Management and Economics
in Partial Fulfillment of the Requirements for the Degree of
Bachelor of Finance
by
Kamilė Bertašiūtė
Advised by
Inga Miliauskienė
January 2017
Vilnius
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Abstract
Bertašiūtė, K., The Impact of Cross-Listing on the Value of High-Tech Companies: Bachelor
Thesis: Finance. Vilnius, ISM University of Management and Economics, 2016.
This bachelor thesis analyzes the impact of cross-listing on the value growth of high-
tech companies. The trend to list shares outside the domestic market is increasing in recent
years, especially in high-tech industry, because companies seek to access broader investors
base, higher expertise or larger funds of capital. However, the clear impact of cross-listing on
company‘s performance or value is still under discussions, therefore, the main aim of this
thesis is to identify the factors (ex. investment in R&D, revenues, gross margin, etc.), which
affect the value of companies from different markets and analyze the changes of main ratios
between the cross-listed and domestically listed companies.
The two samples of Germany companies listed either in Frankfurt stock exchange or
U.S. markets are analyzed to measure the impact of cross-listing. The results show that U.S.
markets host much more Large cap high-tech companies than Frankfurt Stock Exchange.
However, operating performance do not differ significantly between the markets. Revenues,
earned by mid cap companies, are statistically equal, as well as EBIT. While, cross-listed
high-tech companies tend to invest more in R&D in recent years, which may imply about the
faster value growth for companies, listed in U.S. markets than in the Frankfurt Stock
Exchange.
Keywords: cross-listing; high-tech industry; growth of value; operating performance.

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Santrauka
Bertašiūtė, K., Listingavimo keliose rinkose įtaka aukštųjų technologijų įmonių vertei:
bakalauro baigiamasis darbas: finansai. Vilnius, ISM vadybos ir ekonomikos universitetas,
2016.
Šiame bakalauro baigiamajame darbe yra analizuojami faktoriai, kurie daro įtaką
aukštųjų technologijų įmonių, kurios leidžia akcijas kitose rinkose, vertei. Pastarųjų metų
tendencijos rodo, kad daugelis įmonių, o ypač aukštųjų technologijų sektoriuje, vis dažniau
leidžia akcijas užsienio rinkose, kadangi tikisi pasiekti platesnę investuotojų rinką,
kokybiškesnes verslo kompetencijas ar didesnes akcinio kapitalo lėšas. Tačiau tiesioginė
listingavimo užsienyje įtaka įmonės veiklai ar vertei yra vis dar diskutuotina, todėl šio
bakalauro baigiamojo darbo tikslas ir yra išnagrinėti faktorius, kurie daro įtaką skirtingų
rinkų įmonių vertei ir išanalizuoti pagrindinių faktorių pokyčius tarp įmonių, listinguojamų
užsienio ir vietinėse rinkose.
Dvi imtys: viena, Vokietijos aukštųjų technologijų įmonių, leidžiančių akcijas
Frankfurto akcijų biržoje, ir kita, Vokietijos aukštųjų technologijų įmonių, leidžiančių akcijas
Jungtinių Amerikos Valstijų rinkose, – yra nagrinėjamos, norint ištirti įtaką, kurią daro
listingavimas užsienyje. Gauti rezultatai rodo, jog Jungtinių Valstijų biržose yra daug daugiau
didelės kapitalizacijos aukštųjų technologijų įmonių nei Frakfurto akcijų biržoje. Tačiau
reikia pažymėti, kad nėra žymaus skitumo tarp dviejų rinkų veiklos rezultatų. Pajamos,
uždirbtos vidutinės kapitalizacijos įmonių, yra statistiškai vienodos tarp dviejų rinkų, taip pat
kaip ir pelnas prieš mokesčius. Visgi Jungtinėse Valstijose listinguojamų įmonių investicijos į
mokslinius tyrimus ir plėtrą ženkliai išaugo pastaraisiais metais: tai gali lemti spartesnį
užsienyje listinguojamų įmonių augimą.

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Reikšminiai žodžiai: listingavimas keliose rinkose; aukšųjų technologijų sektorius; įmonės
vertės augimas, veiklos rezultatai.

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List of graphs
Graph 1. R&D expenditure ................................................................................................................ 13
Graph 2. High-Tech startup density ................................................................................................... 14
Graph 3. Percentage of cross-listing in U.S. from different markets................................................... 19
Graph 4. Cross-listing by sectror in U.S............................................................................................. 20
Graph 5. Market capitalization of high-tech companies, listed in U.S. markets .................................. 39
Graph 6. Market capitalization of high-tech companies, listed in Frankfurt Stock Exchange ............. 40
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List of tables
Table 1. Results of F test, Breusch-Pagan test an Hausman test: Frankfurt-listed companies. ............ 41
Table 2. Fixed effects regression for Frankfurt-listed companies. ...................................................... 42
Table 3. Results of F test, Breusch-Pagan test and Hausman test: cross-listed companies. ................. 44
Table 4. Fixed effects regression for cross-listed companies. ............................................................. 45
Table 5. t-test for independent variable: revenues. ............................................................................. 47
Table 6. t-test for independent variable: revenues of medium cap companies. ................................... 48
Table 7. Medians of revenues, earned during 2012-2015 ................................................................... 48
Table 8. Medians of investment in R&D during 2012-2015. .............................................................. 50
Table 9. Medians of EBIT during 2012-2015..................................................................................... 50

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Contents
Introduction ....................................................................................................................... 8
Situation Analysis .............................................................................................................10
Importance of high-tech sector .......................................................................................10
Degree of countries‘ innovation ......................................................................................11
Centres of High-Tech .....................................................................................................14
High-tech trends in Lithuania .........................................................................................16
Common ratios of high-tech companies ..........................................................................17
High-tech sector in U.S and cross-listing trends ..............................................................18
Trends in European Stock Exchanges .............................................................................21
Theoretical justification and research methodology ............................................................23
Reasons why companies cross-list ..................................................................................23
Impact from cross-listing on company’s performance .....................................................26
Methods of empirical research ........................................................................................28
Empirical research of cross-listing impact to the value growth ............................................32
Data ..............................................................................................................................32
Variables of the regression models .................................................................................33
Structure of the research .................................................................................................36
Part I. Summary statistics............................................................................................36
Part II. Differences in value of domestically listed companies vs. cross-listed companies.
..................................................................................................................................38
Part III. Regression analysis. .......................................................................................40
Part IV. The growth ratios of companies in Frankfurt stock exchange vs U.S. markets. .47
Conclusion ........................................................................................................................52
Reference List ...................................................................................................................54
Appendices .......................................................................................................................57
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Introduction
Raising equity capital by issuing shares has always been a common way for
companies to grow. However, recently, this traditional way of financing gained a quite
different dimension. Companies no longer stay in their domestic market, where they are
familiar with regulations, requirements, but rather prefer obtaining financing abroad as the
first choice of entering equity market or either second, after issuing shares in domestic
markets. The reasons are widely discussed in international environment, which emphasises
that companies trading in foreign market can access broader investors base, gain higher
recognition and thus, are able to easily obtain financing, which leads to bigger growth and
better performance. However, the clear impact on any company is still under discussions,
because it depends on many circumstances, such as industry, size of a company, domestic
country, etc.
Though the trend to raise capital abroad is increasing every year, especially in high-
tech industry, which is growing rapidly and makes one of the biggest sectors worldwide
nowadays. As A.T Kerney (2015) study points out, from 2011 to 2015 high-tech market grew
by 5% in Midlle East and Africa, Asia and N. America; 2% in Europe and 3% in P.America.
In order to maintain the level of growth, companies need to obtain financing, which has
become very broad in the global environment, because companies are able to raise capital in
many different markets. So, the main problem raised through this sudy is whether there is an
impact on high-tech company‘s value growth from cross-listing in foreign market. Therefore
the purpose of the thesis is to identify the factors (ex. investment in R&D, revenues, gross
margin, etc.), which affect the value of companies from different markets and analyze the
changes of main ratios between the cross-listed and domestically listed companies. In order to
achieve this goal, five objectives will be defined, which will be implemented throughout the
thesis:
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1. To review the industy of European stock exchanges, especially Frankfurt stock
exchange, and U.S. markets (NYSE and NASDAQ) in terms of size and companies
being listed.
2. To analyze the industry of high-tech companies in Europe, identify the centres of
high-tech and the main trends of listing of such companies.
3. To overview the academic literature, which analyzes the reasons of companies‘
decision to list shares outside the domestic market, and posible benifits, which can be
gained.
4. To compare German high-tech companies, listed outside the domestic market, i.e.
U.S., and German companies, listed in domestic market, in terms of value and growth
ratios by building a regression model.
5. To analyze the results of the research and identify which ratios in U.S and German
markets should be enhanced for the growth of value in high-tech companies and
which market leads to higher growth ratios.
Therefore, the thesis will be organized, using the following methods: after reviewing
the implication of scientific literature, the empirical research will be performed in order to
estimate if theoretical ideas work in real cases of German companies.
This research may be valuable for high-tech companies, considering about raising
capital abroad, since the research estimates the direct impact of such decision. Moreover, the
thesis may help companies to identify the main factors for growth of value. The research will
be based on German high tech companies, but similar conclusions may be applied to other
Central or Western Europe countries, since they have similar business structure, financial
ratios, growth and economy conditions.

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Situation Analysis
In situation analysis the subject of the thesis, namely stock exchanges in Europe, will
be analyzed in terms of size, market capitalization over time, differences and companies
involved. Also, the bigger emphasis will be put on the performance of high-tech companies,
listed on European exchanges, and especially Germany, since the empirical evidence will be
based on this sector. Therefore, high-tech industry will be also analyzed throughout the
situation analysis. Lastly, the main problems raised in the thesis will be explained.
Importance of high-tech sector
High technology (abbreviated as high-tech) can be defined in numerous different
ways depending on the scope of the research, i.e. it may be defined as a percentage of
knowledge creation and transfer or percentage of technical workers involved in the
development. However, the most common way to define high technology is the following:
the level of innovation in the company, meaning the percentage of research and development
(abbreviated as R&D) involved in the activity of the company (E.J. Malecki, 1985, p.348).
The industry of high-tech involves many sectors, but the most common are Information
Technology, Telecommunications, Pharmaceuticals & Biotechnology, Technolology
Hardware & Equipment, Software & Computer services, Chemicals, Robotics, Aerospace,
and Semiconductors.
High-tech sector is gaining an extremely huge importance worldwide, because
companies are relying on more advanced technologies, innovative ways of organizing
enterprises. According to the A.T Keney study (2015) the industry of high-tech was growing
in every continent: from 2011 to 2015, 5% growth was recognised in emerging markets in
Asia and Middle East, whereas the advanced economies in Europe and N.America faced
lower rate of growth ranginf from 2% to 3%. The recent trends, identified by Ernst&Young
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research (2015, p. 33), in the industry of high-tech are the following. Primarily, it is
continuous evolution of e-commerce: it may seem that this field is saturated with all kinds of
business, however, the research shows that sector still has a lot of unfilled niches in the
market, such as e-commerce, so successful businesses can be build. Secondly, hardware for
the innovations, such as internet of things, smart homes and 3D printing, may be the leading
sector in the upcoming future, because almost every industry will be affected. To illustrate,
only one sphere: smart electronic gadgets for households will create tremendous amounts of
data (commonly known as Big Data), which is a valuable tool for companies in order to reach
customer’s needs and create more user-friendly products. So, every enterprise engaged in Big
Data research may create a strong competitive advantage and strategy. Also, continuously
developing 3D printing may shape the way how the manufacturing industry was operating for
years. These and similar examples show that in order to succeed in the market, companies
have to adopt new technologies and invest in innovation to go in line with the market leaders.
Degree of countries‘ innovation
New trends increase the degree of technology not only in the industry itself, but also
in the whole country. Therefore, the most technologically advanced countries worldwide can
be identified, by measuring several ratios. The main variable, identifying the level of
technology in a country, is investment in research and development (R&D) as a percentage of
country’s GDP. This ratio shows how much capital companies are investing in developing
new products, procedures and introducing innovations. As Statista database shows, in 2015
main sectors investing in R&D were the following: computing and electronics, healthcare,
auto, software and Internet, industrials – all these sectors spent more than 10% on R&D each;
computing and electronics having the highest percentage, equal to 24.5%. This statistical data
shows that companies, mainly from high-tech sector, are spending the biggest amounts on
R&D. Speaking about particular country, according to World Bank data (refer to the Graph 1
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below), as of 2014, South Korea was the leading country of R&D expenditure, i.e. it made
4.29% of GDP. Bearing in mind that GDP in S. Korea in 2014 was 1411.33 Billion USD, the
gross amount of R&D was equal to 60.5 billion USD. Whereas United States in 2013 spend
around 2.7% of GDP on R&D, which is equal to the gross amount of 454.8 Billion USD. In
total terms, it means that U.S. companies were investing in R&D much bigger amounts than
S. Korea. As for Europe, in percentage terms Sweden had the highest rate of R&D, equal to
3.16% of GDP, followed by Denmark, Austria and Germany. However, in gross terms
Germany was a complete leader, since German companies invested 2.86% of GDP for
research and development, equal to gross amount of 110.9 Billion USD. Even though the
number is four times smaller than U.S, Germany still is able to compete in the worldwide
market. For instance, high-tech giant Siemens, based in Germany, in 2016 was planning to
spend 4.8 billion USD in R&D on development of power stations, generation of new products
and building new innovative plants in Munich. Innovation level in Germany is strongly
supported by the government, which creates projects, so that local companies could develop
in the field of technology. Also, especially small and medium enterprises in Germany are
encouraged to involve themselves into high-tech being supported by various organisations,
such as The Federation of German Industry or Germany Trade&Invest.

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4,5
4,3
4 4,1
4
3,7
3,5 3,4
3,5 3,5 3,3 3,3
3,2 3,2
3,3 3,1 3,2
3,1 3 3 3,1
3 3,1 2,9 3
3 2,8 2,8 2,9
2,8 2,9
2,8 2,7
2,6 2,7 2,7 2,7 2,7
2,5 2,5 2,6 2,6
% of GDP
2,4
2
2007 2008 2009 2010 2011 2012 2013 2014
United States Germany Sweden Korea, Rep. Denmark Austria
Graph 1. R&D expenditure (% of GDP) 2007-2014. Source: The World Bank Data
As the different data shows, Germany is considered to be the most technologically
advanced country in Europe. For example, in terms of high-tech exports, it is the second
worldwide, after China, with the amount equal to 184 Billion USD in 2015. Moreover, in
Bloomberg Innovation Index (2016), Germany is the second after S. Korea. The country
presents high ratios of R&D intensity, Manufacturing value-added, Patent activity and High-
tech density. The latter ratio measures the number of domestically listed high-tech
companies, as a percentage of domestic listed companies. Since the Innovation index is
constructed in a way that shows ranked countries in terms of each ratio, Germany is ranked as
a fifth in High-tech density, after U.S. S. Korea, Japan and France. This ratio is important in
identifying the share of economy, owned by the high-tech sector, also it identifies centres of
high-tech. In the graph bellow slightly different ratio is presented: high-tech start-ups density,
i.e. estimated number of high-tech start-ups established per 1000 people (The Global Startup
Ecosystem Ranking. 2015). In United States approximately two high-tech start-ups are
created per 1000 people, which is the highest ratio worldwide. The European average is
considerably lower, i.e. one start-up is established per 1666 people. In terms of country, in
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Germany one start-up is established per 2800 people. Even though the ratio is much lower
than in international market, it is the highest among European countries. Summarising the
graph, the high-tech centre of start-ups in Europe is Berlin followed by London and Paris.
However, these cities are far beyond the worldwide ratios.
HIGH-TECH STARTUP DENSITY

Paris 0,2
London 0,3
Berlin 0,35
Singapore 0,45
Tel Aviv 0,85
Europe Average 0,6
United States 1,85
0 0,5 1 1,5 2
Graph 2. High-Tech startup density (per 1000 inhabitants) 2015. Source: The Global Startup
Ecosystem Ranking 2015. Retrieved from: http://blog.compass.co/the-2015-global-startup-ecosystem-
ranking-is-live/
Centres of High-Tech
In Europe there are several centres of high-tech, namely Silicon Roundabout in UK,
Sophia Antipolis in France, Silicon Allee in Germany ̶ they all compete in terms of
companies hosted, venture capital attracted, technologies developed. According to research of
Ernst&Young (2015, p.36), Berlin start-ups has raised 2.4 billion USD in 2015, more than
London, Paris or Stokholm, the main rivals in high-tech industry. Moreover, the future of
German technology hub is highly positive. Enterprises in German market every year are
becoming “unicorns”, start-ups valued at 1billion or more than 1 billion USD: the most
popular being Rocket Internet, Zalando, Xing. The dynamic development is fostered by the
Venture capitalists, and also by the KfW development bank in Germany, which lends funds
to small and medium enterprises and start-ups: in 2015 the amount of financing reached 20.4
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billion USD. Most importantly, the funds from KfW are backed by government, which is also
widely involved in supporting enterprises. This policy reduces risk for the bank and creates
incentives to support enterprises.
In addition to this, taxation system in Germany, compared with other developed
economies, is considered to be not so harsh for enterprises. Comparing taxation revenues
among all EU countries, in Germany the amount is lower than the European average, which
makes roughly 37% of GDP1. Thus the Government of Germany collects much lower
amounts of taxes compared with the highest shares in Denmark and France, which makes
more than 45% of GDP in each. Also, the share of direct taxes, such as income tax, makes
31.6%, which is lower than EU average and many developed countries, for example
Denmark, where the share makes 67.4%. Lastly, as the EU Commission report shows, taxes,
such as VAT, Income tax, tend to decrease. Therefore, favourable conditions, created in the
country, attract new businesses, as well as encourage mature ones to expand and acquire new
technologies.
As Ernst&Young research shows, the companies are also willing to go public: huge
exits to the market are expected to take place in 2016 in Germany, due to favourable
conditions, such as successful pipeline of funding and attracted interest from other market
participants. Furthermore, German high-tech start-ups are very potential to reach global
market, because they have financially sound business models, which foster high profitability
and attract foreign investors, who usually invest due to potential of growth. Also, successful
cross border deals may lead to higher valuation of enterprises and stronger position in
international marketplace. Therefore the number of private and public high-tech companies is
increasing the most in Europe: in Frankfurt stock exchange there are 569 German companies
as of 2016, out of which 161 belongs to the high-tech sector. So, high-tech sector makes 28%
1
Taxation Trends in the European Union, 2016, p. 97-101
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of all German companies2, listed in Frankfurt stock exchange. Dividing high-tech sector in
sub-sectors, the dominant one in Frankfurt stock exchange is Software, including Internet, IT-
Services and Software (58 companies), followed by Pharma and Healthcare, including
Medical Technology, Biotechnology and Pharmaceuticals (41 company). Also, high-tech
sector makes one fifth of the total market capitalization of Frankfurt stock exchange.
Moreover, capitalization of high-tech sector in Frankfurt stock exchange is surpassed only by
the financial sector, all other sectors having lower market capitalizations.
Summarizing different researches and statistical data, it seems that companies in
Germany are the most technologically advanced, compared with other high-tech centres in
Europe. Moreover, support from the Government and other conditions encourage the
establishment of new high-tech companies. Due to these reasons dataset from Germany will
be analysed in the empirical part and presented as a benchmark for other advanced countries
in Europe.
High-tech trends in Lithuania
High-tech industry in Lithuania is still underdeveloped area and the majority of
manufacturing entreprises are low or medium technology businesses. However, high-tech is
growing in tremendous amounts in recent years: according to Swedbank research (2016, p.2)
from 2013 to 2015 the high-tech sector grew by 66%. The development of industry is
fostered by the global trends as well as by the support of several technology parks, such as
Visoriai Information Technology Park, Northtown Technology Park, and many others, which
develop infrastructure for high-tech enterprises, combine science and business for innovation.
Several high-tech startups, namely Vinted, TrnasferGo, TRAFI, have the highest growth rates
in recent years, Vinted being the complete leader: from 2013 the company acquired 61
2
Data obtained from the webpage of Frankfurt Stock Exchange.
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million USD after several investing rounds3. The main investors are from U.S and Germany,
namely Hubert Murda Media, Insight Venture Partners, which see very high potential in this
seconhand online marketplace. Company‘s CEO claims that from 2016 they started new
expansion strategy to Europe and U.S. and in four-year perspective they are planning to do
IPO in the biggest exchanges, either London Stock Exchange or NYSE in U.S. This example
shows that Lithuanian companies are aiming for highest standards worldwide. Therefore the
results and problems raised in this research are relevant for Lithuanian high-tech industry,
since it may be a viable path in the future for successfull companies to raise capital in the
most advanced European economies and even enter U.S. capital market for sufficient growth.
However, since Lithuanian companies do not have any listings in U.S. markets yet, it would
be hard to analyze impact of cross-listing to this market, therefore German companies are
taken as a representative sample in the empirical part. The obtained results can be treated as a
benchmark for high-tech companies, considering to list shares abroad.
Common ratios of high-tech companies
Generally speaking, high-tech industry presents particular financial ratios, which help
to identify the position and performance of a company in this rapidly growing industry. As
mentioned before, high-tech companies invest a lot in R&D in order to acquire the newest
technologies and developments. The amounts vary from company to company, but usually
the amounts start from 10 million USD, as it can be observed from the sample of companies,
analyzed in the empirical part. Therefore, usually in the early stages of company‘s operations,
the net results are negative, due to significant investments on R&D. After analysing ratios of
high-tech companies listed in Frankfurt stock exchanges, the general trend shows that
companies in early stage has low revenues, but they invest tremendous amounts in R&D,
3
Verseckas, D. (2015) “Vinted” IPO – bent po 4 metų. Verslo Žinios. Retrieved from:
http://vz.lt/2015/12/14/vinted-ipo--bent-po-4-metu.
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which is pretty obvious: in order to grow quickly, high-tech company has to face big
expenses in R&D. However, net income appear to be negative until the more mature stage of
a company.
On the other hand, high-tech sector tends to have high ratio of gross margin (above
50%), because of several reasons. Firstly, gross margin does not take into consideration
expenses on R&D (these expenses are subtracted later), only revenues and cost of production
is compared. Another thing is that it is challenging to compete with existing high-tech
companies, due to entry barriers, such as high initial investments for product development,
expertise, which may be a discouraging point for new businesses. Therefore, existing
enterprises can maintain market share and at some point act as a monopolies and maintain
high gross margin. Lastly, the nature of costs influence the gross margin, meaning that
usually in the early stages, business have higher costs than in later stages, which leads to high
gross margin in the later stages of business. To illustrate, a company producing soft-wares
incurs much more costs in the developing stage, but when the software is created, the
expenses decrease, unless there is a need to develop or improve the product, which increase
gross margin.
High-tech sector in U.S and cross-listing trends
United States have been always recognised as the worldwide centre of high-tech due
to high-quality expertise, billion-USD amounts of funds flowing through Silicon Valley,
quick development of new technologies. Statistical data shows4 that in NASDAQ and NYSE
(not counting all OTC markets) there are listed over 1000 local High-Tech companies. In
NASDAQ, as expected, high-tech makes bigger share, i.e. high-tech companies makes one
third of the total number, whereas market capitalisation makes one half of the total
capitalization of companies listed in NASDAQ.
4
Data obtained from official NASDAQ and NYSE websites.
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Another interesting trend is that U.S market is also considered to be the main market
hosting international companies. The graph below shows the percentage points of companies
from different countries, which prefer listing shares in U.S than in domestic markets. The
graph presents data of all industries. So, Asia makes the biggest share of foreign listings in
U.S., followed by Europe and North America, namely Canada. From Asian companies, China
is a complete leader, making 19% out of total 29%. The fast growth of this emerging market
encourage numerous companies to seek for expertise and high standards overseas. Speaking
about Europe, many companies from Central Europe prefer trading shares abroad. Since these
companies operate in the advanced economies, namely UK, Germany, Netherlands, they seek
even higher quality and can comply with the strict requirements of the most advance stock
exchanges in U.S.
Middle
East
12%
Taiwan
2%
Hong Kong
N. America
2%
20%
S. Japan
America Asia 1%
5% China
29% 19%
Europe Other
26% 5%
Netherlands
13% C. America
8%
Other
36% UK
23%
Germany
17%
Switzerland
11%
Graph 3. Percentage of cross-listing in U.S. from different markets 2016. Source: Nasdaq and NYSE
official webpages.
In terms of industries, companies belonging to high-tech sector also are the leading
ones among foreign listings in U.S. By the annual research, performed by the BNY Mellon
(2016), cross-listing market is increasing every year. From 2010 to 2015 in terms of new
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Depository receipt programs, the market increased by 45%, from 1100 to 1600 programs. The
most active sectors, which usually cross list in US in 2015 were Internet & Software services,
Oil& Gas and Pharmaceuticals. Through all three sectors around 1300 billions of foreign
capital were raised in U.S. The graph below shows capital raised (in billions USD) in top ten
sectors in 2014 and 2015. The complete leader is Internet Software and Services, which is
increasing year after year: from 2015 it was raised 100 billion USD more capital than in
2014. The general trend shows that mainly high-tech companies from sectors, such as
Communication Equipment, Internet retail, Wireless services, Semiconductors,
Pharmaceuticals, Internet software, cross-list in U.S.
2015 2014
45,3
Communication Equipment 56,8
95
Beverages 88,9
103,5
Internet & Catalog Retail 137,6
159,4
Wireless Telecommunication Services 155,1
203,6
Semiconductors 171,6
210,6
Banks 287,6
240,8
Metal & Mining 289,8
307,1
Pharmaceuticals 322,9
370,4
Oil, Gas & Consumable Fuels 497,4
719,8
Internet Software & Services 619,8
0 100 200 300 400 500 600 700 800
Graph 4. Cross-listing by sectror in U.S. 2014-2015 (in billion USD). Source: BNY Mellon. (2016).
The Depositary Receipt Market Review
The reasons are quite obvious. Despite the main advantage of raising funds for
development through stock markets, companies are also more visible to the global markets,
have higher transparency than those private ones. Also, public companies have easier access
to debt markets. In addition to this, suppliers, customers and investors may be more confident
towards public companies, which may imply that these companies are more transparent and
have better positioning in the marketplace. Lastly, expertise, which companies can gain in
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U.S., as well as recognition of being listed in the biggest and most requiring stock exchanges,
attracts attention from international markets.
However, these reasons may apply to many advanced countries, which can offer
favorable business conditions, like sophisticated investors, technologically advanced
environment, available funds. Therefore, companies may equally likely cross-list in
developed European markets or Asia.
Trends in European Stock Exchanges
Nowadays, European stock market is the second largest capital market after Asia-
Pacific, which proves that equity financing is leading in the financial system. For instance, in
2015 European exchanges raised 32% of global capital in IPO, according to research
conducted by Ernst & Young (2015). Moreover, the third largest deal globally in fourth
quarter of 2015 was performed in the Netherlands by ABN AMRO Group NV, which was
equal to $4.1b.
Totally, 42 countries in Europe have domestic exchanges, which are different from
one another not only in terms of securities traded and companies involved, but also in terms
of ratios, such as capitalization, size, liquidity. To illustrate, as of 2014 March, London Stock
Exchange, Euronext, Deutsche Bourse, SIX Swiss Exchange, NASDAQ OMX and BME
Spanish exchanges were the largest in terms of domestic market capitalizations. London and
Euronext reached more than 3 trillion USD dollars, while the rest four had market
capitalization higher than 1 trillion USD dollars each. Moreover, London stock Exchange,
Euronext, Deutsche Boerse, Nasdaq OMX and Borsa Italiana, were all among top 10
exchanges in terms of proceeds; also, London and Nasdaq OMX were among top 10 in terms
of number of deals in the fourth quarter of 2015. This high position worldwide is associated
with a slow but steady economic recovery in Europe. What is more, investor confidence in
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Europe is maintained by the loose monetary policy and strong expectations that quantitative
easing from European Central Bank will continue until March 2017 and beyond.
Since the European capital market is well developed and can offer high-quality and
favourable conditions, it also should attract foreign listings. However, the volume of cross-
listing in Europe is way smaller than in U.S. According to report of Federation of European
Securities Exchanges (2016), the main exchanges, hosting foreign business are London Stock
Exchange (734 foreign listings), Euronext (118 foreign listings), Deutsche Borse (63 foreign
listings) and Luxembourg stock exchange (159 foreign listings). However, among foreign
listings usually appear companies from neighbour countries, which are willing to
internationalize in similar markets. Therefore, Asian, Middle East or American companies are
very rarely requesting to be listed in Europe.
So, it may be claimed that companies are seeking for particular benefits while cross-
listing in other markets. These benfits may include increase in valuation, growth
opportunities or enhanced operating performance. The following part will provide the
overwiev of academic literature towards the reasons and benefits of cross-listing.

23
Theoretical justification and research methodology
In this part the analysis of the literature, based on the issues presented in the thesis,
will be presented. It will include various researches and different opinions of academics and
experts of the topic. Also, the methods used in the empirical part will be explained.
Reasons why companies cross-list
A wide range of academic papers are analyzing the reasons why companies rather
choose to be listed abroad than in the domestic markets, which they are familiar with. The
term, commonly used to describe such company’s behavior, is called “cross-listing” (also
cross-trading, international trading). It defines companies, which list shares outside the
domestic country as the first choice of being listed or as the second choice, after listing shares
domestically. The common practice among the firms, as suggested by Howson and Khanna
(2014, p.608), is to cross-list either in U.S. or UK, partially because they grab a significant
amount of international attention and may be perceived as superior than those, listed in
domestic market, since they can meet higher standards. Thus, such companies are signaling to
investors about the high value and quality. However, cross-listing exists not only in U.S and
UK markets, but also in Asia, and many other European markets.
Pegano, Roell and Zechner (2002, p. 2653-2659) explained in their paper clear
reasons why companies do list abroad. They stated that nowadays many companies globalize
not only in terms of sales, but also in terms of capital raising, therefore the direct access of
foreign capital may bring significant benefits. Pegano et al mostly emphasized financial
advantages, such as easier access to capital raising or improve terms of exiting strategies of
existing shareholders. This can be achieved by taking several benefits of cross-listing. First
of all, reducing barriers to investors, arising from different regulations, transaction costs due
to foreign currency and lack of information, may contribute to the performance of a company
24
seeking for a capital. Widening investors base means increased risk sharing, which results in
lower cost of capital. However, the main constraint discouraging investors from domestic
markets is shortage of information as analyzed by Merton’s Simple Model of Capital Market
(1987, p. 500). The main assumption of the model, built in the paper, is that investors are
constructing their portfolio only of those securities, which they have enough information of.
Therefore, many investors abandon markets, which lack transparency. So, this theory justifies
the fact that listing abroad, i.e. in a well-known market, may contribute to the improvement
of investors base, because companies have to comply with high regulations and present high
transparency.
Another significant reason, why companies may prefer cross-trading is much higher
quality of expertise abroad. It is especially applicable to high-tech companies, which are
continuously seeking for knowledge to develop business. Thus, markets, where sufficient
experience can be obtained, are extremely attractive. As a rule of thumb, such experience is
more common in deep and big markets, such as U.S, Hong Kong or UK. This idea is
developed by Blass and Yafeh (2000, p.15), who argue that innovative high-tech companies,
based in Israeli, are moving to U.S market, where high-tech sector is well-developed, so,
companies can gain valuable recognition and learn from the professionals. While, less
potential high-tech companies are rather listing shares in local Israeli market. This tendency
shows that in order to acquire growth opportunities, companies should reach the most
experienced markets, even though they are big and challenging.
Thirdly, companies may go to foreign markets, because it could contribute to
advertising of a product. In the model of Stoughton (2001, p. 398) it is emphasized that
company, raising capital, is always widely discussed in the media, which enhances
company’s publicity. Furthermore, the author claims that there is a tendency among high-tech
companies to enter public markets, if the quality of product is much higher than in the rest of
25
the companies. Therefore, raising capital in international exchange is a direct signal for
investors and other market participants that a company is confident about the quality of
product, which as well can contribute to the marketing.
On the other hand, the main issue of listing abroad is costs and additional
requirements incurred by the companies. Besides direct costs, such as various listing fees,
advisory costs, company has to deal with costs of compliance, for example, implement rules
of Sarbanes-Oxley Act (Richard Dobbs and Marc H. Goedhart, 2008). Two main sections:
302 and 404, set requirements for management regarding the financial statements disclosure.
Section 302 requires management team to verify that reported financial information is
accurate, while Section 404 requires to implement internal controls of financial system. The
latter is the most costly, because a lot of efforts are put to test and document established
controls. In addition to this, all foreign companies, listing shares in U.S. has to fill F-20 Form,
which standardizes the form of financial statements, so that investors could evaluate
companies from different countries. Lastly, there are many indirect costs that the companies
have to deal with. These include the risk of failure or the significant underpricing of stocks.
All things considered, it seems clear that companies may gain a lot of benefits from
cross-listing including financial advantages, higher expertise and better marketing. Even
though trading abroad sometimes means a more expensive way of raising capital, the
advantages outweigh disadvantages. However, one could ask, what are the consequences on
domestic markets, which apparently are losing the order flow due to active international
trading. Obviously, the decreasing clientele for local markets means slowdown in this
industry not only in terms of competition, but also in the main ratios. Domowitz (1998, p.
2015-2017) investigates the effects of international listings to domestic exchanges in
emerging markets. It is stated in the report that companies view cross-listing as value adding,
while changes in liquidity and volatility has adverse effects on the quality of domestic
26
markets. One of the assumptions made in the model is that if the level of information about
the domestic market is low, then it causes a significant decrease in order flow. It means that
cross-trading cause investors to migrate from local market to international, which leads to
decreased trading activity as well as the liquidity of the domestic market. Moreover, because
liquidity decrease and spreads increase, the overall volatility of the market and the variance
of overnight information about the company increase. Domowitz concludes that when there is
a lack of quotation transparency, the order flow, followed by cross-listing, lowers the quality
of the local market.
Impact from cross-listing on company’s performance
Even though there seems to be a quite significant impact of cross trading to the local
and international stock markets, the main concern is whether there is a reasonable influence
on the company’s, which are issuing stocks abroad, performance, growth and ratios. If the
significant effect exists, at some point it could give an answer to the question, why companies
choose to cross-list or why some exchanges are not competitive. The academic literature
provides different opinions on this issue, ones stating that evidences do not show reasonable
impact, while others provide results, supporting the hypothesis of cross trading benefits to the
company.
The research, performed by Bancel and Mittoo (2001, p.217), analyses European and
Canadian managers’ perceptions towards the impact of issuing stocks out of domestic
country. The results show the following trend: 60% of managers claim that the benefits of
cross-listing outweigh the costs of listing abroad. And these benefits are related to the
increased trading volume after listing abroad, meaning much higher liquidity. However, 30%
of managers have the opposite view on international listings, i.e. they claim that the benefits
are not significant and costs are not covered by the advantages of cross-listings.
27
These managers’ perceptions can be supported by the numerous studies, based on the
effects of cross-listing to the company. One of the theories presented by Sundaram and Logue
(1996, p. 71) is that cross-listing has a direct effect on the value of companies’ shares. In case
of country-benchmarked and industry-benchmarked results, the trading abroad shows
significant evidence of a rise in stock price. To be more precise, the prices of cross-listed
stocks rose from 4 to 10 percent, in comparison with the stocks traded in home markets
during the similar periods. The study concludes that investors consider cross-listed companies
more valuable than those listed in domestic markets. And this higher valuation remains at
least six months after the issue of stocks. Another study, researching the impact of cross
listing on the valuation of the company is performed by Lang, Lins and Miller (2003, p.330).
The evidence proves that non-U.S. companies, which were listed in U.S., have a greater
shareholders value than those listed in home markets. The interesting finding is that the
higher value is a consequence of the greater analyst coverage and more precise forecasts
towards the company. And the most important thing is that this more sufficient level of
information applies only to cross-listed companies. Finally, the higher valuation of firms,
trading shares abroad, is consistent with lower cost of capital and improved corporate
governance, as the study suggests. Another studies, prepared by Mittoo (2001, p.251), also
justifies the positive effect of cross-trading to the company, but in terms of liquidity and
trading volume. However, Mittoo suggests that these ratios also depend on the domestic
exchange where the company is being listed initially.
On the other hand, the opposite opinion, stating that the listing abroad is not followed
by reasonable benefits to the company, also exists. To illustrate, a recent study conducted by
Hwang (2013, p. 152), examines whether there is an impact on company’s value, returns,
operating performance, from listing abroad in UK, U.S and Luxembourg markets. The
sample of 55 companies, shows that Tobin’s-q ratio, which is used as a measure of

28
company’s valuation, decreased by 40.85% after three years of listing abroad. Whereas,
speaking about holding returns, it decreased significantly, during the three years of listing
abroad, i.e. holding returns under-perform benchmarks independently of the market, where
the companies are listed, by 52%. Lastly, operating performance is also weaker as compared
with the performance three years before listing abroad. ROA, ROE, measures of operating
performance, tumbled in the post-listing period. Therefore, the study suggests that benefits of
cross-listing may not be so significant as it was considered before. However, this case
analyzes Taiwanese companies, which may imply that significant differences among markets
contribute to insignificant benefits.
Therefore, studies, presenting similar cases about European or U.S. companies,
should be taken into consideration. As Alexander and Janakiramanan (1988, p. 140)
investigate, there may be negative impact of cross-trading to companies established in
Europe, Australia and Canada. The results show that cumulative abnormal returns (CAR)
after listing in a foreign market tends to decrease on an increasing margin as time goes by, i.e.
in the 36th month after trading the CAR decreased by 53.21%. Moreover, the interesting
finding, presented by researches was that decrease was faster for non-Canadian firms than
Canadian ones. Thus, it may be assumed that non-Canadian companies are more sensitive to
U.S. regulations and differences of the markets.
To summarize, after reviewing the academic literature, it seems that cross-listing is
not always meant to have significant benefits for companies, since it depends on many
circumstances. Therefore, in every case, a deep research may be performed.
Methods of empirical research
In the empirical part, Germany and U.S. markets are of particular interest. Firstly,
U.S. market is considered to be the largest cross-listing market (Wang, Chung, Hsu, 2008, p.
95), which can meet fundraising needs for biggest companies. Therefore, most researches
29
(Blass, Yafeh, 2000; Domowitz, Glen, Madhavan, 1998; Sabherval, 2007, etc.) uses U.S as a
benchmark to analyze trends of cross-listing. Also, little is analyzed about European
companies, which cross-list in U.S., because mainly the subject of researches is companies,
established in North America. Whereas Germany is the most technologically advanced
country in Europe, where a lot of high-tech companies are headquartered. Moreover, German
high-tech companies are the leading ones from Europe, which cross-list in U.S. Due to above
mentioned reasons, the German and U.S markets are being analyzed. What is more, results of
Germany-based analysis can be applied to other highly technological European countries,
namely UK, France, Netherlands, or other companies established in Central Europe
(Belgium, Luxembourg, Denmark), because these countries have highly developed markets,
similar economic conditions, business models and growing industry of high-tech. Lastly, the
most developed European market was chosen, due to amount of data, which can be obtained,
i.e. smaller economies, such as Baltics, Eastern European countries, do not have enough
cross-listings in U.S., if at all, therefore no sufficient results can be obtained.
In the empirical analysis two main methods will be used: comparative data analysis
and regression analysis. In the comparative data analysis, sample of German high-tech
companies, listed in U.S. exchanges, such as NASDAQ and NYSE, will be compared with
the sample of German high-tech companies, listed in domestic Frankfurt stock exchange.
Firstly, descriptive statistics will be analyzed, in order to measure the general similarities or
differences between samples. But the main emphasis will be put on the value, measured by
the market capitalization, of these two samples during the selected period. Also, the main
factors, influencing the growth of value will be analyzed and compared between the samples.
The second method, used in the empirical research – regression analysis – will help to
identify the main factors, which influence the growth of value. For panel data three types of
models can be applied: pooled OLS, fixed effects or random effects model. The suitability of
30
each model depends on the distribution, variables, number of observation, thus three
statistical tests will be performed (F test, Breusch-Pagan test, Hausman test) in order to
decide which model best suits for this particular dataset.
Finally, the following linear model will be built:
Y = β1t + β2tx2t + β3tx3t + … + εt,
 Y represents dependant variable of the equation, which is market capitalization of the
particular company in this case. Dependant variable is the main factor, which is
supposed to be predicted in the analysis, as well as the possible changes throughout
the period.
 Variables x2t, x3t, …, xt, are the independent parameters of the equation, which are
expected to have the influence on the dependant variable. In other terms, independent
variables explain the behaviour of Y. Independent variables, used in this thesis, will
be discussed in details in the empirical part.
 Coefficient β1t is the intercept (constant), which estimates the value of dependent
variable, when all explanatory variables are equal to zero.
 Coefficients β1t, β3t, …, βt estimate the impact of independent variables to the
dependent one, i.e. these coefficients measure if the influence is positive or negative.
Thus, they measure the change in dependent variable when the independent variables
change by one unit.
 ε is called the random variable, error term, which exists due to possible additional
variation in parameter Y, not explained by the independent variables xt..
What is more, it is important to describe the type of data, which will be analysed. The
two samples of companies will be organized as a panel data set. Panel data is a type of data
31
where observations on cross-section units are repeated over time (Wooldridge, 2009, p.444).
The main advantages of using this type of data are the following. Firstly, it allows to study
dynamics over time, in this case the changes in company’s growth ratios. Moreover, panel
data allows to model temporal effects and control variables, which fluctuate over time. In this
case, four years of data will be used (2012-2015). Lastly, since four-year time trend increases
the number of observations, the precision of regression estimates also increases, which leads
to the more valuable results.
After the modelling regression equation, the significance level of the model will be
measured, in order to make correct conclusions. Therefore Goodness of Fit (R 2) and
Hypothesis testing will be performed.

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Empirical research of cross-listing impact to the value growth
In the empirical part of the thesis the research, based on the high-tech companies’
growth, will be performed. The main purpose of this part is to measure if cross-listing of
high-tech companies in U.S. markets results in higher growth ratios of the company.
Data
In order to achieve the above mentioned goal two samples of companies will be used.
The first sample of the companies, consists of 34 high-tech companies established in
Germany, but listed in U.S. exchanges, either NASDAQ or NYSE. The data was obtained
from the NASDAQ and NYSE official webpages. The data of four recent years (2012-2015)
was obtained. Both biggest exchanges were chosen, because they host the biggest number of
companies, so sample size can be increased. It is important to mention, that all companies are
listed in Frankfurt stock exchange as an initial market, while as the additional market to be
listed, U.S. is chosen by these companies. The sample contains 34 companies from seven
high-tech sectors, namely Chemicals, Healthcare Equipment & Service, Pharmaceuticals &
Biotechnology, Semiconductors, Software & Computer Services, Tech. Hardware &
Equipment, Telecommunication & Broadcasting. Pharmaceuticals & Biotechnology and
Software & Computer Services groups makes the biggest clusters of the companies from the
sample, i.e. each group contains 9 companies. All other sectors are presented by two or three
companies.
The second sample of companies consists of 43 High-tech companies listed only in
Frankfurt stock Exchange in Germany. The sample is bigger than the first sample, however it
does not influence the results. Since Frankfurt Stock exchange belongs to Deutsche Borse, all
companies are divided into three groups: Prime Standard, General Standard and Entry
Standard. Companies from the Prime Standard group have to comply with strict transparency
33
standards and also, they have to provide additional information for investors, such as Interim
Reports. Companies belonging to General Standard have to meet only minimum legal
requirements, so this group is suitable for smaller companies, which are seeking cheaper
listing. The Entry Standard is suitable for young companies, since they have to meet only few
requirements and listing is low cost. After analyzing three groups, the sample was made from
companies, belonging to the Prime standard group, because the companies are financially
sound, transparent and disclose more information, therefore better analysis can be made.
The sample includes companies from five high-tech sectors, namely, Chemicals,
Pharmaceuticals & Biotechnology, Software & Computer services, Technology and
Telecommunication & Broadcasting. Two sectors: Pharmaceuticals & Healthcare and
Software present the biggest groups of the companies, each cluster includes 10 companies.
As in the case of first sample, the dominant sectors are the same. Therefore, high-tech sector
generally is gaining more importance, however, some main sub-sectors can be identified:
Pharmaceuticals & Biotechnology and Software and Computer Services.
Variables of the regression models
Having those two samples of companies, the model, analyzing growth ratios, will be
built. For the model, panel data will be used, meaning that samples contain two dimensional
data: cross-sectional and time series (four most recent years: 2012, 2013, 2014 and 2015).
Variables such as Revenues, Expenditure in R&D, Gross Margin, Net Income, EBIT and
Market Capitalization will be included in the model. The following paragraphs will discuss
each variable in detail and explain the reasons of choosing these particular variables.
Market Capitalization is a measure of the size of an enterprise, which groups listed
companies into three groups: Small Capitalization (market cap $300 million – $2 billion),
Medium Capitalization (market cap $2 billion – $10 billion) and Large Capitalization (market
cap $10 billion or more). The ratio is calculated by multiplying the price of a share by the
34
number of shares outstanding, which a company has issued. As Wang, Brooks, Lu and
Holzhauer analyzes in their study (2014, p.33), Small Caps tend to have high growth
prospects, therefore many investors prefer investing in small or medium size companies,
however, such companies also have much higher business risk, due to lack of expertise.
Whereas, Large cap companies usually have stable performance over time, but lower ratio of
growth. As for analyzed samples, the first sample contains Large cap (50% of the sample)
and Medium Cap (50% of the sample) companies. The second sample contains smaller
companies, i.e. 30% percent of sample makes Large Cap companies, whereas the rest 70% is
Medium Cap companies. Since market capitalization is the main measure of the value of the
company, it will be the dependent variable.
Revenues will be the independent variable of the both models. Money earned by the
companies for the products or services provided to customers is the main measure of
company’s activity and growth prospects. Even though high-tech sector is quite different
from other industries, investors still analyze the growth of revenues over year in order to
measure how well the business in run by managers.
Gross Margin will be the independent variable of the models. Gross margin shows
how much revenues are left after direct costs, associated with the development of the product,
are incurred. The ratio is expressed in percentage points, which can be interpreted as earnings
which a company generates from every dollar of revenue before operating costs and other
taxes are subtracted. The ratio is important measure of efficiency, since it evaluates how
management controls costs during the development phase of the product.
Expenditure on R&D will be another independent variable of the model. As already
mentioned, expenditure on R&D is a specific ratio, which identifies high-tech industry,
because particularly high-tech companies invest vast amounts to the development of the
product. It is important to mention, that according to International Financial Reporting

35
Standards (IFRS, IAS 38), R&D can be treated as the operating or capital expenditure
depending on which phase the project is: research or development. Expenses incurred in the
research phase are treated as operating expenses and written off to the income statement
(decrease profit), whereas investments made in the development stage can be capitalized, i.e.
written off as an addition to the assets (increase the value of assets). In the selected
companies, the average amount of R&D expenses makes 23% of operating expenses.
Moreover, this ratio is supposed to have positive impact on revenues, because the more
developed the product is, the more sales a company should generate. As it is stated in the
research of Jeon and Kim (2011, p. 53), expenses on R&D in high-tech industry have positive
effects on firm’s value and contains more information about the value than in the low-tech
industries. Therefore, this ratio is included in the model as a valuable representative of
growth.
EBIT is a measure of operating profit, which does not take into consideration tax
burden on capital employed. Due to different taxation standards among countries, it may be
useful to take EBIT as profitability ratio, because taxes do not affect EBIT. In high-tech
industry EBIT varies from company to company, because it highly depends on R&D
expenses, which decreases EBIT significantly.
Net Income or the bottom line is the main ratio, which measures the financial
performance. It shows what the company has generated over period after all expenses and
taxes has been subtracted. Even though High-tech companies have high expenses on R&D,
especially in the earlier stages, which leads company to be in red, the selected samples of
observations contains Medium and Large Cap companies, which are supposed to be more
stable, meaning generate positive earnings. Thus, Net Income also could be a significant
measure of company’s growth and value creation.

36
Structure of the research
The research will be constructed into four main parts:
1. Summary statistics5 – the broader picture of the data will be presented, which allows
to decide about the nature of tests being used in the further analysis.
2. Market Capitalization analysis – comparison between two samples will allow to
identify, which sample represents higher value.
3. Regression model – identifies the main factors affecting the growth of market
capitalization.
4. Analysis of main determinants – identification of the most important growth ratios
and deeper analysis of them between two samples.
Part I. Summary statistics. Overviewing summary statistics will provide useful
insights about the distributions of samples and main trends, which allow to decide which
statistical tests have to be used for the analysis.
The first group of companies contains annual financial ratios, of 34 companies:
market capitalization, revenues, gross margin, EBIT, Net Income, investment in R&D. There
are no missing values. The main thing, which could provide useful information about the
data, is dispersion, represented by means and medians. Means and medians in this example
differ very much from one variable to another, for instance, investment in R&D, revenues,
market cap and net income present means, in million or billion dollars, while gross margin
has smaller mean, presented in percentage terms. Different scales of measurement do not
allow to make accurate comparisons among ratios. Therefore, to compare dispersions,
coefficient of variation should be considered rather than standard deviation, because
coefficient of variation uses normalized variance, so that variables of different measuring
5
All calculations regarding empirical part can be found in appendices.
37
scales can be compared. The largest variation exists among the data points of R&D (CV =
1.99), meaning that the observations are spread widely around the mean. While the smallest
dispersion is presented by the gross margin (CV = 0.79), thus all the observations present
similar values and are distributed close to the mean. All the rest variables show pretty similar
dispersion, i.e. the coefficient of variation falls in the interval of 1.4-1.9. However, it shows
that data points are widely spread around the mean. Another important statistical measure is
skewness of the data, which shows the asymmetry of the data points around the mean. Gross
margin has a negative skewness, which means that the distribution is not symmetrical and it
falls to the right. Even though coefficient of variation shows that data points of gross margin
are close to the mean, they fall to one side. While all other variables have positive skewness,
which means that the distributions are not symmetrical and fall to the left. Therefore, all
distributions have high coefficients of variation and are skewed, which implies that these
distributions are not normal.
Speaking about the second sample of companies, it consists of annual financial ratios
of 43 companies: market capitalization, revenues, gross margin, EBIT, Net Income,
investment in R&D. The same trends apply to this sample as of the first group of companies.
Due to different scales of measures, coefficient of variation is a better measure of dispersion.
Variables of gross margin are closely spread around the mean, since the coefficient of
variation is the lowest (CV = 0.47), whereas net income has the biggest dispersion, equal to
3.5, which implies about widely spread data points. Other variables, such as R&D and market
capitalization also have high coefficients of variation, i.e. more than 2.5, thus they are spread
around the mean quite highly. Another important thing to mention is that gross margin is the
least skewed and has lowest coefficient of variation, which means that it has the closest to
normal distribution. While all other variables are highly skewed to the left, having positive
skewness, therefore, distributions are not symmetrical and widely spread around the mean.
38
The analysis of the summary statistics shows that all distributions are not normal,
rather asymmetric, data points are spread widely around the mean. Therefore, mean is not a
good representative of these samples, so non-parametric statistical tests, using median in
analysis, will be used in the research.
Part II. Differences in value of domestically listed companies vs. cross-listed
companies. First of all the difference of market capitalization will be tested within the
samples, secondly it will be tested between domestically listed high-tech companies and
those cross-listed in U.S. market. The tests allows to identify if there was a growth in value
during the period of four years and if the two samples of companies have statistically
significant difference between the values.
As it was discussed in the first part, market capitalization holds a skewed distribution,
however Shapiro-Wilk test of normality was also performed as an additional proof, that the
distribution is not normal and non-parametric test should be applied. The null hypothesis of
the test states that the distribution of the variable is normal, whereas the alternative
hypothesis states that distribution is not normal. The test was performed for each sample of
companies for different years. Since the p-value was always lower than the alpha level (0.05),
the null hypothesis was rejected and concluded that distributions of market capitalization are
not normal in every period, thus non-parametric tests will be used.
To test differences between market capitalizations, non- parametric Wilcoxon Rank-
Sum Test was chosen. The null hypothesis states that the medians of two samples are not
different, whereas the alternative hypothesis states that the medians are different. The growth
of market capitalization within each separate market was tested in every period (2012-2013;
2013-2014; 2014-2015; 2012-2015) however, p-value was always higher than the alpha level
(0.05) and it was not rejected in every case. It means that the medians of samples were
always statistically equal, i.e. in the period of 2012-2015 there were no significant changes in
39
market capitalization neither in Frankfurt stock exchange, nor in U.S markets. The p-value
for Frankfurt market (2012 vs. 2015) is equal to 0.42 and it is not rejected. For U.S market
(2012 vs. 2015) the p-value is equal to 0.77 and it is also not rejected. The results may imply
that there were only minor changes in market capitalization during the selected period in each
analyzed markets, but generally the value of market capitalization remained stable.
However, slightly different results are obtained when the market capitalizations are
compared between the samples in different years. In every years from the interval 2012-2015
market capitalization in U.S market was significantly different from market capitalization in
Frankfurt market. The p-value was always lower than alpha level (0.05), therefore, the null
hypothesis was rejected. Since the test suggests that medians of those two samples are
statistically different in each period, it is worth comparing medians in numeric terms. The
graphs below shows medians of each sample in different years.
40
MARKET CAP, BILLIONS USD
36,21 35,94
33,77
35
29,39
30
25
20
2012 2013 2014 2015
YEARS
Graph 5. Market capitalization of high-tech companies, listed in U.S. markets, 2012-2015.

40
4,00 3,48
MARKET CAP, BILLIONS USD 3,50
3,23
2,89
3,00 2,43
2,50
2,00
1,50
1,00
0,50
0,00
2012 2013 2014 2015 YEAR
Graph 6. Market capitalization of high-tech companies, listed in Frankfurt Stock Exchange, 2012-
2015.
The median of cross-listed companies varies from 29 to 36 billion USD, which is
much higher than the median of Frankfurt-listed companies, which falls in the interval of 2 to
3 billion USD.
To sum up, even though the market capitalization within each market was statistically
stable during the analyzed period, it was different between the two markets. The average
company in U.S stock exchanges is the Large cap enterprise with market capitalization
ranging from 29 to 36 billion USD. While the average company in Frankfurt stock exchange
is a Medium cap enterprise with the market cap ranging from 2 to 3 billion USD. Thus, in
U.S. markets mainly Large cap companies are listed, therefore the sample contains more
Large cap companies. Whereas, Frankfurt stock exchange holds more Medium cap
companies.
Part III. Regression analysis. Regression model will identify the main factors
influencing market capitalization in different markets, their significance and importance for
the growth of value.
Results of the first model: Frankfurt-listed companies. Since the samples represent
panel data, three tests have to be applied in order to decide which model best describes the
trends of the High-Tech companies, listed in the Frankfurt stock exchange: pooled OLS,
fixed effects or random effects model.

41
After running the tests in GRETL, the following results appear:
Test p-value
F test (pooled OLS vs. fixed effects) 1,59 × 10-13
Breusch Pagan Test (pooled OLS vs. random 8,4 × 10-9
effects)
Hausman Test (random effects vs. fixed effects) 1,62 × 10-7
Table 1. Results of F test, Breusch-Pagan test an Hausman test: Frankfurt-listed companies.
F test is performed in order to decide if the pooled OLS or fixed effects model should
be used. The null hypothesis of F test states that the pooled OLS model should be used,
whereas the alternative hypothesis states that fixed effects model should be used instead. In
this case, the p-value is lower than any alpha level, therefore the null hypothesis is rejected,
which means that the fixed effects model should be used to analyze this dataset.
Breusch Pagan is performed in order to decide if pooled OLS model or random effects
model should be used. The null hypothesis of Breusch Pagan test states that the pooled OLS
model is consistent, while the alternative hypothesis states that the random effects model
better describes the dataset. In this case the p-value is lower than any chosen alpha level,
therefore the null hypothesis is rejected and concluded that according to Breusch Pagan test,
random effects model is consistent for this dataset.
Since two tests suggest different conclusions, the last Hausman test is performed in
order to decide whether random or fixed effects model is consistent for this dataset. The null
hypothesis of the test states that random effects model better describes the data, whereas the
alternative hypothesis states that fixed effects model is more consistent. Since the p-value is
lower than any chosen alpha level, the null hypothesis is rejected and it can be concluded that
fixed effects model is more consistent for this dataset.
After running fixed effects regression on the dataset, the following results are
obtained:
42
coefficient Standard error t-ratio p-value

9
constant -1.605×10 7.767 -2.067 0.04
R&D 19.242 1.329 14.480 3.51×10-31
Revenue 1.044 0.142 7.308 1.10×10-11
Net income 0.553 1.294 0.427 0.669
Time trend 2.337 1.955×10 8
1.195 0.233
Gross margin 1.735×109 1.109×109 1.564 0.119
EBIT -2.967 1.987 -1.493 0.137
Table 2. Fixed effects regression for Frankfurt-listed companies.
According to table above, the first statistically significant variable of the regression is
constant: the p-value is lower than alpha level (0.05). The constant of this model is the slope
of the regression and it implies that if all other variables were equal to zero, then the market
capitalization would be equal to minus 1.6 billion.
The second statistically significant variable with 95% confidence interval (𝑝 −
𝑣𝑎𝑙𝑢𝑒 = 3,51 × 10−31 < 𝛼(0.05)), is investment in R&D. The variable has a positive
influence on market capitalization, which means that when R&D increases by one unit,
market capitalization increases by 19.24 units or in other words, when company invests 10
thousand USD in R&D more, the market cap increases by 192.4 thousand USD. It is
important implication for the high-tech company, because the higher the investment on
product development, the more value can be created.
The third statistically significant variable with 95% confidence interval (𝑝 − 𝑣𝑎𝑙𝑢𝑒 =
1.10 × 10−11 < 𝛼(0.05)), which has an influence on market capitalization, is revenues. The
coefficient of revenues is positive, which means that one unit increase in revenues, leads
market capitalization to increase by 1.044 units or in other words, when the revenues grow by
10 million USD, the market cap grow by 10.44 million USD. Also, the logic behind is
obvious: when the company is generating more revenues, the value and size of the company
increases.
43
Last four variables: time trend, gross margin, net income and EBIT, present slightly
similar results. Gross margin and net income supposedly have positive impact on market
capitalization, i.e. increase in gross margin by one unit leads market cap to increase by 1.73
units, while increase in net income by one unit leads market cap to increase by 0.55 units. It
could be useful insights for the management of the company, because the better control of
expenses and thus higher results, the more growth on the value of company. Time trend also
suggests that the market cap was growing over time, i.e. 233 million USD per year. Variable
of EBIT has a negative impact on the market cap: when it increases the market cap decrease.
However, these variables are not statistically significant, i.e. p-values for variables are bigger
than alpha level (α(0,05)), therefore the null hypothesis, stating that the coefficients are not
different from zero, are not rejected. Therefore, the effects of these variables may be not
consistent and suggest wrong results.
Taking into consideration the quality of the model, adjusted R 2 is equal to 93.8%,
which shows the quality of the model, i.e. 93.8% of the variability of the dependent variable
is explained by independent variables. High value of this ratio implies that unexplained
variability of the dependent variable is very low. However, the density plot of the model is
not symmetrical and smooth, which implies that the model has some limitations. But it also
could be the case of panel data, since model, using panel data very rarely have ideal density
plots.
Summing up the results of the first regression, significant determinants of market
capitalization for high-tech companies, listed in Frankfurt, are investment in R&D and
revenues: these two variables increase market capitalization over time, therefore, enterprises
developing products and boosting sales more than the average company, may generate a
much higher value. However, R&D is the most important variable for market capitalization,
meaning that it has the highest impact.

44
The results of the second model: U.S.-listed companies. For the second sample of
German high-tech companies, listed in U.S markets, also three tests were applied in order to
decide, which model: pooled OLS, fixed effects or random effects, is the most consistent for
the dataset.
The results of the tests are the following:
Test p-value
F test 1,31 × 10-15
Breusch Pagan Test 1,67 × 10-13
Hausman Test 0,002
Table 3. Results of F test, Breusch-Pagan test and Hausman test: cross-listed companies.
The p-value of F test is lower than any chosen alpha level, therefore the null
hypothesis, stating that pooled OLS model is consistent, is rejected and concluded that fixed
effects model is consistent.
Null hypothesis in favor of pooled OLS model is rejected in Breuch Pagan test,
because p-value is lower than any chosen alpha level. Therefore, Breusch Pagan test suggests
to opt for random effects model.
Lastly, since previous tests suggested different models, Hausman test was also
applied. It has the p-value lower than alpha level (0.05), therefore, again null hypothesis is
rejected. Since the null hypothesis states that random effect model is consistent and
alternative hypothesis states that fixed effects model is consistent, the conclusion suggested
by Hausman model is to opt for fixed effects model.
The regression modeled by fixed effects estimator is the following:
coefficient Standard error t-ratio p-value

constant 8,082×109 3,425×109 2,359 0,0198
R&D 12,194 1,090 11,18 1,05×10-20
Gross margin 5,47×108 6,983×108 0,783 0,434
Revenue 0,167 0,086 1,941 0,054
45
Net income 1,15 1,315 0,874 0,383

EBIT 4,16 1,185 3,510 0,0006
Time -1,575×109 1,215×109 -1,296 0,197
Table 4. Fixed effects regression for cross-listed companies.
After performing the fixed effects model, the results follow similar trends as in the
first model. The first significant variable in the model, when the confidence level is 95%, is
the constant. Since constant is the slope of the regression line, it supposes that market cap
would be equal to 8.08 billion, when all other variables are equal to zero. It may imply that
the growth of market capitalization in U.S. markets is influenced by other determinants, such
as macroeconomic ratios, business cycle or economy conditions.
The second significant variable with the confidence level equal to 95% (𝑝 − 𝑣𝑎𝑙𝑢𝑒 =
1.05 × 10−20 < 𝛼(0.05), is R&D. The effect of R&D to the market capitalization is positive,
meaning that when investment of R&D increases by one unit, the market capitalization also
increases by 12.19 units or in other words, when company invests 10 thousand USD more in
R&D, the market cap increases by 121.9 million USD. Therefore, according to the model, the
more company invests in the R&D and product development, the more value it creates.
The third statistically significant variable with the 95% confidence level, observed in
the model, is revenues, as in the first model. Revenues are expected to have positive impact
on the market capitalization, i.e. when the revenues of the company increase by one unit, the
market capitalization increases by 0.16 units or in other words, when revenues increase by 10
million USD, market cap increases by 1.6 million USD. Revenues do have direct impact on
value generation of the company.
Another statistically significant variable of the model is EBIT. With 95% confidence,
if EBIT increases by 10 million USD, market capitalization increases by 40.16 million USD.
The positive impact implies that control and management of expenses have also very
important impact on value growth of the company.

46
The rest of the variables, such as gross profit and net revenues appear to have positive
impact on the market capitalization. Increase in both variables, leads to increase in market
capitalization. However, the significance of these two variables is not sufficient enough to
claim that the results are consistent. The p-value of gross margin is equal to 0.4, which is
higher than the alpha (0.05) level. Also, the p-value of net income is equal to 0.3, which is
also higher than the alpha (0.05) level. Thus, p-values of these two variables are rejected and
can be concluded that they do not have a clear impact on market capitalization.
Lastly, the time trend suggest that market capitalization decreases over time, i.e. the trend of
the selected sample of companies shows that market capitalization decreased by 1.57 billion
in one year. The time trend presents data of four years, which may imply that it could be a
recent trend showing that companies, listed in U.S. is constantly decreasing in value.
However, the time trend is not sufficient enough (p-value = 0,197 > alpha(0,05)), therefore,
the trend may be not always applicable.
Speaking about the quality of the model, adjusted R2 is equal to 97%, which is high
value, showing 97% of variation of the dependent variable is explained by the independent
variables and the unexplained variation of market capitalization is very low. The density plot
is again not symmetrical and smooth as in the first model, but since it is panel data, generally
it is hard to obtain symmetrical density plots.
Summarizing the results of the second model, it should be pointed out, that revenues,
EBIT and investments in R&D have positive impact on the market capitalization of the
German High-tech companies, listed in U.S market. As in the first sample, R&D is the most
important determinant of the market capitalization, i.e. has the highest influence. However,
the general trend may imply that market capitalization is decreasing over time in significant
amounts.
47
Part IV. The growth ratios of companies in Frankfurt stock exchange vs U.S.
markets. Since the results obtained after performing regression analysis, show that several
ratios, namely revenues, investment in R&D and EBIT, have the significant influence on
market capitalization, they will be analyzed in more detail in order to measure, which market
have the higher ratios and higher growth.
First of all, Shapiro-Wilk test was applied to all samples of variables to confirm that
the distributions are not normal and Wilcoxon Sum Rank test have to be used when
comparing ratios. The p-values were lower than the alpha level (0.05), thus null hypothesis
was rejected and concluded that non-parametric test has to be used.
Secondly, the revenues, earned by companies in two different markets were
compared, since the variable appeared to have the impact on capitalization in both markets.
The independent samples Wilcoxon Rank-Sum test was applied to the two groups of
revenues, earned by companies from different markets, in order to see, if any of the groups is
more superior towards the other and has the higher growth in each period. The test was
applied to the groups of revenues in each period and the following results were obtained:
Year p-value Decision

2012 0.051 Do not reject null
2013 0,035 Reject null
Table 5. t-test for independent variable: revenues.
The null hypothesis states that the medians are equal, whereas the alternative
hypothesis states that the medians are different. Null hypothesis was rejected in every period,
except 2012, because p-values were lower than the alpha (0.05) level. Therefore, it can be
concluded that significant difference existed between the revenues of high-tech companies,
listed in U.S markets and listed in Frankfurt stock exchange from 2013 to 2015. However, in
48
2012 the significant difference between the revenues of two markets did not exist and earned
revenues were statistically equal in both markets.
However, the different results were obtained, when the samples of companies were
divided in terms of market capitalization, i.e. Medium Cap and Large cap. Then the
independent sample test was again applied to revenues, earned by medium cap companies in
each period. The comparison was made to the Mid cap companies, due to the fact that
medium cap companies makes around one half of companies in each sample.
Years p-value Decision

2012 0,451 Do not reject
Table 6. t-test for independent variable: revenues of medium cap companies.
The null hypothesis in every period was not rejected, because it was higher than the
alpha (0.05) level. It can be concluded that there were no significant difference between
revenues, generated by medium cap companies, listed in U.S. market and listed in Frankfurt
stock exchange during the period 2012-2015. Comparing the medians in numeric terms, for
the total sample the medians differ in significant amounts, i.e. around 10 billion USD in every
period, which may be due to differences in size of companies. While comparing the medians
of Medium cap companies, some insightful conclusions can be made:
Year U.S markets Frankfurt Stock Difference

Exchange
2012 9,233×107 1,200×108 0,276×108
2013 9.127×107 1,303×108 0.39×108
2014 1,445×108 1,235×108 -0,21×108
2015 1,418×108 1,338×108 -0,08×108
Table 7. Medians of revenues, earned during 2012-2015
49
Analyzing the table above, it is clear that in 2012 and 2013 Frankfurt-listed
companies earned more annual revenues, by 27 Million USD and 39 million USD
respectively. However, in 2014 and 2015 U.S.-listed companies generated more revenues by
21 million USD and 8 million USD respectively. But statistically, these differences are not
significant. Another thing, according to Wilcoxon Rank-Sum test, revenues also did not grow
in significant amounts within the markets during the period 2012-2015.
Summarizing the results obtained when analyzing the revenues of two samples, it may
be concluded that significant differences exist between revenues, earned by large cap and mid
cap companies. However, comparing revenues only among mid cap companies, even though
some differences exists throughout the period, the differences are fluctuating and revenues
are not significantly different according to statistical tests. Therefore, neither mid cap
companies, listed in U.S., nor listed in Frankfurt, are superior towards each other in terms of
generated revenue. Lastly, revenues did not grow by significant amounts in none of the
markets during the period 2012-2015.
Another for market capitalization important variable is investment in R&D.
Comparing investments in R&D between two samples, the results show that amounts
invested by cross-listed companies significantly differ from amounts invested by
domestically listed companies in 2014 and 2015. The p-value in both periods are lower than
the alpha (0.05) level, therefore, the null hypothesis, stating that medians are equal, is
rejected. However, the investments in R&D are not significantly different in 2012 and 2013
between the samples. Since the p-values were higher than the alpha (0.05) level, the null
hypothesis was not rejected, which means that the medians of two samples are statistically
equal.
Year U.S. markets Frankfurt Stock Exchange

2012 9,545×107 1,78×107
50
2013 8,657×107 1,5×107

2014 1,096×108 1,5×107
2015 1,187×108 1,832×107
Table 8. Medians of investment in R&D during 2012-2015.
The table above shows medians of investment in R&D in two samples. Statistical test
shows that within both samples investment on R&D did not change significantly in the period
of 2012-2015. Comparing R&D in different markets, U.S-listed companies in all periods
have higher medians than domestically listed companies. However, the difference is smaller
in 2012 and 2013, therefore, it is not statistically significant. While from 2014, U.S.-listed
companies present higher expenses on R&D, which leads to significant difference between
the two medians of samples. So, it may imply that cross-listed companies invested much
higher amounts in R&D than domestically listed companies in the period of 2014-2015,
which may result in higher value growth in the future periods.
Lastly, when EBIT was compared among the companies, some important insights
were obtained. The difference between two samples appeared to be not significant in all
periods, The p-values were always higher than the alpha (0.05) level, therefore the null
hypothesis, stating that the medians are equal, was not rejected and concluded that medians
are not statistically different between the samples.
Year U.S. markets Frankfurt Stock Difference

Exchange
2012 3,371×107 1,4 1,971×107
2013 7,343×107 1,3×107 6,043×107
2014 1,806×108 1,267×107 1,679×108
2015 2,225×108 1,4×107 2,085×108
Table 9. Medians of EBIT during 2012-2015.
According to Wilcoxon Rank-Sum test the difference between medians of samples in
different periods is not big enough to be significant. Even though the difference is not
significant, the companies, listed in U.S. markets, present slightly higher EBIT ratio than the
51
companies, listed in Frankfurt stock exchange in each period. The difference increases
especially from 2013, because EBIT in cross-listed companies increases, while EBIT in
domestically listed companies remains pretty much stable during all periods. Thus, as the
research shows, in cross-listed companies, investment on R&D and EBIT increased in recent
periods, especially from 2013. However, the increase is not big enough to be significantly
higher than in the domestically listed companies. But, this trend may imply that in the future
periods, cross-listed companies present higher value than domestically listed companies,
because of higher EBIT and R&D ratios, which influence market capitalization.
Summarizing the results of empirical research, some insightful conclusions can be
made. Even though cross-listed high-tech companies do present higher value than those,
listed domestically, but the financial ratios, such as revenues, EBIT, investment in R&D, do
not differ significantly in most cases. Therefore, cross-listed companies are not superior than
domestically listed high-tech companies in terms of financial performance.

52
Conclusion
The rapid growth of the high-tech sector leads to the situation, where companies need
to acquire a lot of capital in order to maintain or increase growth prospects. However, the
decision where the capital should be raised sometimes can be crucial, because the market of
financing may give important benefits, such as broader investors‘ base, higher recognition or
even impact on the operating performance or value of the company.
After reviewing the high-tech industry and comparing the High-tech German companies’,
listed in U.S. markets and Frankfurt stock exchange, the following findings were obtained.
1. In Europe, Germany is considered to be the most technologically advanced country,
because it has high ratios of high-tech exports (184 Billion USD in 2015), investment
in R&D (110.9 Billion USD in 2014), also the country is ranked as the second most
innovative country worldwide by Bloomberg in 2015. Significant level of innovation
leads to highly developed high-tech industry.
2. U.S market has widely developed industry of cross-listed companies, i.e. from 2011 to
2015 foreign trading grew by 45%. The main countries, which cross-list are China
(19%), Canada (20%), Western Europe, namely Germany (17%) and UK (23%).
3. In the recent years high-tech companies were the major industry, willing to cross-list
shares in U.S market: 6 out of 10 main industries, cross-listing in U.S., were high-
tech, which raised 1538 billion USD in 2015.
4. The average company in U.S stock exchanges is the Large cap enterprise with the
market capitalization ranging from 29 to 36 billion USD. While the average company
in Frankfurt stock exchange is a Medium cap enterprise with the market cap ranging
from 2 to 3 billion USD. Thus, big amounts of capital flow to U.S. and companies do
53
maintain higher value in the other continent, which implies about the broader
opportunities and better conditions to run the business.
5. The biggest influence on market capitalization for the high-tech companies, listed in
Frankfurt, have investment in R&D and revenues: these two variables increase market
capitalization over time. Whereas revenues, EBIT and investments in R&D have
positive impact on the market capitalization of the German High-tech companies,
listed in U.S market.
6. Revenues, earned by medium cap companies, are not statistically different between
the two samples: the annual revenues are ranging from 92 million USD to 114 million
USD in the period 2012-2015, so none of the sample is superior towards another in
terms of revenue generation. Even though the differences are not significant,
companies, listed in U.S., earned slightly more revenues (1.4 billion USD) in 2014-
2015 than domestically listed companies (1.2 billion USD).
7. Investments on R&D no dot differ between the samples in the period 2012-2013 and
are ranging from 15 million USD to 95 million USD. While the significant difference
exists between the samples in 2014-2015. Cross-listed companies invested around 110
million USD in R&D, whereas domestically listed companies invested around 20
million USD. Since, investments on R&D influences value growth for both samples
of companies, cross-listed companies may face the higher value growth.
8. The difference between EBIT medians of samples is not big enough to be significant
in 2015-2015. Even though the difference is not significant, the companies, listed in
U.S. markets, present slightly higher EBIT ratio than the companies, listed in
Frankfurt stock exchange, i.e. the difference in the period 2012-2015 increased from
19 million USD to 208 million USD.

54
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58
Appendices
1. Summary statistics: German High-Tech companies, listed in U.S.
Coefficients of variables:
V2 – investment in R&D
V3 – Market capitalization
V4 – Gross margin
V6 - Revenue
V7 – Net income
V8 - EBIT
2. Summary statistics: German High-tech companies, listed in Frankfurt stock exchange.

Coefficient of variables:
V2 – Market capitalization
V4 – investment in R&D
V5 – Gross margin
V8 – Revenue
V9 – Net income
V10 – EBIT
59
3. Shapiro-Wilk Test of normality: market capitalization

2012
2013
60
2014
2015
4. Wilcoxon Rank-Sum Test: market capitalization

U.S.
61
Frankfurt
5. Wilcoxon Rank-Sum Test: market capitalization U.S. vs Frankfurt

2012
2013
62
2014
2015
63
6. Regression analysis
Frankfurt-listed companies
64
U.S.-listed companies
65
7. Wilcoxon Rank-Sum Test: Revenues

2015 Mid Cap
66
US 2012 vs 2015
Frankfurt 2012 vs 2015
2014 Mid Cap
2013 Mid Cap

67
2012 Mid Cap
8. Wilcoxon Rank-Sum test: investment in R&D

2015 Mid Cap
2012 vs 2015 US 2012 vs 2015 Frankfurt

68
2014 Mid Cap
Mid Cap
2013
69
2012 Mid Cap
9. Wilcoxon Rank-Sum test: EBIT

2015 Mid Cap
70
2014 Mid Cap
2013 Mid Cap

71
2012
72
10. Companies, listed in U.S. markets

Gross
Company Date R&D Mkt Cap margin Revenue Net income EBIT
Aixtron 2015 61490000 507670000 25% 219450000 -32360000 -28810000
2014 88750000 1227000000 20% 257720000 -83130000 -75990000
2013 75900000 1446000000 -12% 242860000 -134160000 -126450000
2012 93670000 1606000000 0% 292910000 -186980000 -167060000
Innocoll AG 2015 29390000 202000000 86% 2828000 -47170000 -46770000
2014 3954000 118640000 -24% 5468000 -25130000 -24950000
2013 2296000 118640000 -28% 4897000 2912000 3012000
2012 2243000 118640000 -6% 5703000 -15610000 -15510000
Fresenius Medical Care 2015 140300000 25280000000 32% 16737580000 1029440000 1935000000
2014 122110000 22430000000 32% 15831610000 1045270000 1843000000
2013 125810000 20830000000 32% 14610000000 1110000000 1840000000
2012 111630000 20970000000 33% 13800000000 1187000000 1932000000
SAP 2015 3157000000 95950000000 68% 23070000000 3400000000 4429000000
2014 3100000000 84090000000 70% 23350000000 4362000000 5791000000
2013 3031000000 96510000000 70% 22330000000 4417000000 5838000000
2012 2907000000 98500000000 69% 20860000000 3604000000 4880000000
voxeljet 2015 6070000 84630000 29% 26700000 -10650000 -10580000
2014 5355000 138380000 39% 21490000 -5761000 -5803000
2013 3521000 575480000 40% 15520000 -3604000 -3129000
2012 2022000 575480000 43% 11200000 272600 -421700
Bayer 2015 4281000000 99870000000 54% 51410000000 4287190000 6683000000
2014 4704000000 95280000000 52% 54970000000 4556000000 6791000000
2013 4523000000 98920000000 51% 53330000000 4235000000 5587000000
2012 3874000000 75910000000 52% 51090000000 3089000000 4083000000
BASF 2015 2167000000 71200000000 30% 70449000000 4424000000 6778000000
2014 2505000000 78210000000 25% 98840000000 6855000000 10450000000
2013 2456000000 94690000000 25% 98240000000 6364000000 9639000000
2012 2227000000 77520000000 25% 92730000000 6195000000 8625000000
Deutsche Telekom 2015 500000 82230000000 39% 76820000000 3611000000 8197000000
2014 500000 73490000000 38% 83330000000 3888000000 9329000000
2013 500000 70330000000 40% 79869000000 1235000000 6000000000
2012 500000 46940000000 41% 74780000000 -6882000000 -5188000000
Infineon Technologies 2015 180000000 16560000000 36% 7190000000 826360000 847470000
2014 197000000 11530000000 36% 6650000000 725720000 637300000
2013 500000 10960000000 38% 5863000000 726080000 730150000
2012 500000 8254000000 34% 5041000000 356820000 426350000
Siemens 2015 5148000000 95720000000 29% 86850000000 8362000000 9228000000
2014 5456000000 95860000000 29% 96670000000 7282000000 10950000000
2013 5310000000 95860000000 27% 96350000000 5620000000 8654000000
2012 5511000000 95860000000 28% 100470000000 5389000000 9602000000
Akzo Nobel N.V 2015 385070000 17070000000 41% 16490000000 1086000000 1777000000
2014 482730000 17060000000 39% 19010000000 726090000 1342000000
2013 495380000 17980000000 39% 19380000000 961540000 1319000000
2012 493680000 15210000000 38% 19790000000 -269000000 -1480000000
ICTS INTL NV 2015 2560000 4353000 10% 187020000 -4700000 -578000
2014 2210000 6852000 12% 172930000 1430000 5015000
2013 2182000 7424000 12% 124500000 -3433000 -3032000
2012 2264000 7956000 12% 96350000 -9016000 -5037000
SKY PLC 2015 2264000 21050000000 54% 11965000000 666000000 2738000000
2014 2264000 16650000000 94% 12110000000 1957000000 1883000000
2013 2264000 16650000000 95% 11350000000 1536000000 2177000000
2012 2264000 16650000000 97% 10760000000 1435000000 2089000000
HCI VIOCARE 2015 5320000 28570000000 12% 6000000 -9440000 -9056000
2014 2650000 24840000000 32% 3000000 -19020000 -18840000
2013 2700 20180000000 30% 3000000 -1339000 -1339000
2012 2700 20400000000 23% 3000000 -13600 -23400
Yandex N.V. 2015 221630000 5039000000 72% 987370000 159830000 158410000
2014 234580000 6145000000 72% 1347000000 451550000 406530000
2013 183030000 13990000000 73% 1241000000 423230000 403530000
2012 137230000 6990000000 75% 923760000 264050000 303580000
uniQure N.V. 2015 46780000 138630000 94% 10460000 -71480000 -75340000
2014 33930000 135430000 100% 6230000 -37040000 -44660000
2013 15440000 135430000 73% 3909000 -35620000 -34430000
2012 5868000 135430000 73% 3909000 -18920000 -18810000
Qiagen N.V. 2015 147180000 6850000 65% 1280990000 127100000 169890000
73
2014 163630000 6640000 64% 1344780000 116630000 157840000

2013 419590000 2846000 63% 1302000000 69070000 6822000
2012 257060000 2846000 66% 1254000000 129510000 168600000
ProQR Therapeutics N.V. 2015 23040000 115330000 -40% 7587000 -20830000 -22680000
2014 10150000 367890000 -25% 8653000 -12130000 -15770000
2013 3412000 477520000 -41% 1044000 -4320000 -4270000
2012 3412000 387650000 -41% 1044000 -4320000 -4270000
NXP Semiconductors N.V. 2015 845000 29120000000 46% 6101000000 1526000000 1713000000
2014 743000 16930000000 47% 5647000000 539000000 797000
2013 626000 11100000000 45% 4815000000 348000 591000
2012 628000 65080000000 45% 4385000000 -115000 245000
Mylan N.V. 2015 651600000 25210000000 45% 9429300000 847600000 1255000000
2014 563900000 21520000000 46% 7719600000 929400000 1308000000
2013 507800000 15860000000 44% 6909000000 623700000 1061000000
2012 401300000 10800000000 43% 6796000000 640900000 1113000000
Mimecast Limited 2015 17660000 984840000 71% 141840000 -3244000 -1689000
2014 14460000 545310000 68% 116080000 280000 1140000
2013 12840000 540540000 68% 88310000 -16890000 -16330000
2012 12840000 551910000 68% 88310000 -16890000 -16330000
Merus N.V. 2015 16350000 238980000 -73% 2194000 -25730000 -25510000
2014 12390000 177340000 -85% 1733000 -23150000 -23100000
2013 12390000 123100000 -12% 741100 -13160000 -13090000
2012 12390000 154070000 -12% 741100 -13160000 -13090000
MAM Software Group, Inc. 2015 3860000 79250000 56% 31640000 3000000 3840000
2014 3690000 79310000 56% 30690000 1670000 2456000
2013 3694000 72180000 59% 27470000 3013000 3882000
2012 3405000 41150000 59% 26090000 4096000 5237000
ICON plc 2015 3405000 4240000000 42% 1574980000 239540000 282840000
2014 3405000 3260000000 40% 1503320000 172470000 203500000
2013 3405000 2385000000 37% 1336000000 102810000 122150000
2012 3405000 1679000000 36% 1115000000 55420000 69170000
Alkermes plc 2015 344400000 10920000000 78% 628340000 -227160000 -210760000
2014 272040000 8610000000 72% 618790000 -30060000 -599000
2013 140010000 5413000000 70% 575550000 24980000 84440000
2012 97240000 2516000000 72% 186640000 -45540000 -43190000
Luxfer Holdings PLC 2015 97240000 271980000 23% 460300000 16100000 33000000
2014 97240000 403500000 23% 489500000 29200000 42900000
2013 97240000 264520000 24% 481300000 34100000 52900000
2012 97240000 155830000 25% 511600000 39500000 62200000
BT Group plc 2015 142000000 58700000000 91% 28700000000 3900000000 5339000000
2014 142000000 50430000000 91% 29020000000 3446000000 5134000000
2013 142000000 31710000000 92% 29070000000 3207000000 4609000000
2012 142000000 30780000000 91% 28610000000 3079000000 4899000000
Astrazeneca PLC 2015 5603000000 87110000000 81% 24708000000 2825000000 3538000000
2014 5579000000 90540000000 78% 26547000000 1233000000 1756000000
2013 4821000000 74050000000 80% 25810000000 2556000000 3759000000
2012 5243000000 60700000000 81% 27970000000 6240000000 8050000000
STMicroelectronics NV 2015 1281000000 5824000000 34% 6897000000 104000000 129000000
2014 1289000000 6716900000 34% 7404000000 128000000 136000000
2013 1751000000 7116000000 32% 8082000000 -500000000 -569000000
2012 2413000000 5772000000 33% 8493000000 -1158000000 -2061000000
Technicolor SA 2015 142000000 2778000000 23% 4053000000 91000000 275210000
2014 180000000 1913000000 25% 4431000000 175540000 345760000
2013 189000000 1142000000 24% 4582000000 -115540000 62420000
2012 169000000 563870000 23% 4603000000 -25710000 271270000
Roche Holding Ltd. 2015 9331000000 3265000000 69% 5238000000 921000000 1336000000
2014 10830000000 4463000000 73% 5456000000 1021000000 1471000000
2013 10000000000 3965000000 75% 5246000000 1205000000 1767000000
2012 10190000000 7942000000 73% 4853000000 1005000000 1506000000
Novartis AG 2015 8738000000 2032900000 65% 5035900000 1778300000 880300000
2014 9086000000 2282200000 68% 5363400000 1021000000 1297000000
2013 9071000000 1887900000 69% 5272000000 917500000 1147000000
2012 8588000000 1547000000 69% 5197000000 927000000 1196000000
Materialise NV 2015 20180000 338380000 58% 113230000 -3115000 -2923000
2014 20070000 346060000 60% 108190000 2741000 3810000
2013 14070000 429040000 60% 91270000 4660000 5314000
2012 12120000 459800000 60% 75990000 1994000 2817000
LiqTech International Inc 2015 710000 36760000 20% 15810000 -2210000 -2835000
2014 340000 45200000 14% 14560000 -3370000 -4732000
74
2013 500000 56330000 10% 12830000 -4827000 -6407000

2012 742000 31340000 16% 16920000 -2774000 -3791000
75
11. Companies, listed in Frankfurt Stock Exchange
Gross
Company Date Mrk Cap R&D margin Revenue Net income EBIT
3U HOLDING AG 2015 26670000 15000000 44% 48240000 -1000000 -1000000
2014 30348620.69 15000000 33% 49240000 -3000000 -4000000
2013 16343793.1 15000000 28% 40000000 -4000000 -5000000
2012 20235172.41 15000000 13% 61000000 -9000000 -13000000
aap Implantate
AG 2015 38820000 15000000 65% 28000000 -5000000 -9000000
2014 41932924.53 15000000 64% 31590000 -5000000 -6000000
2013 60513529.41 15000000 70% 33000000 -2000000 4000000
2012 24903396.23 15000000 69% 29000000 2000000 -1000000
ATOSS Software
AG 2015 223240000 8700000 69% 44900000 7600000 11300000
2014 105779418.6 8000000 69% 39700000 7000000 9800000
2013 91340203.49 7500000 71% 35500000 2900000 8400000
2012 67523610.47 7100000 71% 33000000 5800000 7600000
Basler AG 2015 201250000 6100000 48% 85400000 6200000 8000000
2014 127975705.2 5300000 52% 79240000 8200000 12000000
2013 94406693.3 4900000 51% 65000000 6000000 9000000
2012 45414968.2 4800000 48% 56000000 4000000 8000000
bet-at-home.com
AG 2015 589650000 152000000 100% 100300000 30700000 30800000
2014 589650000 152000000 99% 95300000 25600000 25800000
2013 347889402.4 89000000 98% 76300000 14500000 14300000
2012 242580125.1 88000000 100% 75500000 1700000 1200000
Biofrontera AG 2015 110860000 4530000 70% 4140000 -11200000 -10000000
2014 110860000 3200000 64% 3100000 -10720000 -10000000
2013 167736000 30000000 67% 3000000 -8000000 -7000000
2012 186052000 28000000 67% 3000000 -4000000 -1000000
Biotest AG Vz. 2015 600790000 98800000 24% 589600000 -82500000 73000000
2014 4315553093 67200000 39% 582000000 19200000 50000000
2013 3378302432 54000000 42% 501000000 32000000 50000000
2012 2259353883 4500000 42% 440000000 33000000 43000000
Brenntag AG 2015 8080000000 152000000 22% 10364100000 366500000 684000000
2014 7204653824 152000000 20% 10015600000 339300000 577000000
2013 20610703796 67000000 20% 9770000000 399000000 542000000
2012 15333969102 59000000 20% 9690000000 336000000 563000000
Carl Zeiss
Meditec AG 2015 2820000000 112000000 52% 1040030000 62300000 153000000
2014 2099388401 99900000 54% 909260000 75000000 129000000
2013 2407655536 110000000 54% 909000000 75000000 120000000
2012 2211395431 108000000 54% 906000000 92000000 132000000
CompuGroup
Medical SE 2015 2470000000 152000000 37% 543030000 44310000 68000000
2014 1291121618 152000000 34% 515390000 32750000 45000000
2013 1204830575 99000000 37% 470000000 23000000 57000000
2012 942064617.8 99000000 38% 458000000 31000000 66000000
EASY
SOFTWARE AG 2015 24950000 1000000 31% 39130000 3000000 2000000
2014 37425000 1000000 34% 41150000 1000000 2000000
2013 35048809.52 1100000 37% 30000000 1000000 2000000
2012 26375714.29 1200000 37% 27000000 1000000 2000000
Eckert & Ziegler
Strahlen- und
Medizintechnik
AG 2015 141900000 4900000 45% 140000000 10550000 8000000
2014 139113333.3 3500000 50% 127300000 6790000 12000000
2013 208780000 3800000 49% 117000000 9000000 14000000
2012 174826666.7 3700000 54% 120000000 10000000 20000000
Elmos
Semiconductor
AG 2015 288700000 37100000 42% 219600000 16180000 21000000
2014 323391850.8 36100000 44% 209520000 18290000 20000000
2013 211540538.7 35200000 42% 189000000 9000000 13000000
2012 141758080.1 34500000 42% 180000000 8000000 10000000
euromicron AG 2015 41670000 15000000 47% 344890000 -13250000 11000000
2014 80471153.18 15000000 48% 346340000 3000000 11000000
2013 102274389 12000000 46% 329000000 -7000000 4000000
2012 135553012 110000000 47% 336000000 9000000 20000000
76
Evonik Industries
AG 2015 13280000000 434000000 33% 13507000000 991000000 1597000000
2014 12814035088 408150000 28% 12917000000 568000000 1075000000
2013 13662091228 398000000 28% 12708000000 2054000000 1170000000
2012 1.2505E+13 379000000 29% 13365000000 1165000000 1338000000
EVOTEC AG 2015 921670000 18320000 30% 127680000 16500000 -3000000
2014 817288096.4 12400000 33% 89500000 -6980000 -1000000
2013 812846313.3 12000000 36% 86000000 -25000000 2000000
2012 599640722.9 11800000 36% 87000000 2000000 2000000
GK SOFTWARE
AG 2015 107180000 500000 26% 62600000 -1500000 -1000000
2014 107180000 500000 27% 44600000 -1900000 -3000000
2013 154780986.9 490000 30% 43000000 1000000 -1000000
2012 112002322.2 490000 31% 29000000 1000000 -1000000
init - innovation in
traffic systems
AG 2015 148850000 4050000 30% 105150000 7550000 10800000
2014 207847265.4 3000000 36% 102990000 12100000 18700000
2013 232672349.8 3800000 37% 100100000 12100000 17700000
2012 237597164.1 3900000 35% 97300000 11100000 17300000
K+S AG 2015 4170000000 15000000 46% 4175500000 495000000 781550000
2014 4368852691 12000000 42% 3821700000 380600000 641300000
2013 4406260623 14000000 43% 3950400000 437100000 655800000
2012 6896841360 19000000 45% 3935300000 667600000 836400000
LANXESS AG 2015 5740000000 130000000 22% 7902000000 165000000 400000000
2014 5177517499 160000000 20% 8006000000 47000000 381000000
2013 6507386841 130000000 19% 8300000000 -159000000 281000000
2012 8824685021 120000000 23% 9094000000 508000000 849000000
LPKF Laser &
Electronics AG 2015 171990000 500000 87% 87300000 -3500000 -3700000
2014 260489708.7 500000 76% 119700000 8510000 12670000
2013 447030873.8 500000 77% 129660000 15100000 23200000
2012 387633495.1 500000 75% 115080000 13500000 20400000
MediGene AG 2015 196310000 8530000 84% 6810000 -13000000 -10100000
2014 69078896.23 7500000 85% 13800000 -5760000 -2880000
2013 65560132.08 6610000 77% 7590000 -10280000 -9000000
2012 19260603.77 7400000 80% 6280000 -9860000 -10300000
Merck KGaA 2015 42600000000 1709000000 68% 12844700000 2117800000 1843600000
2014 34027649770 1704000000 69% 11500800000 2000190000 1762000000
2013 56276497696 1704000000 67% 11095000000 1202000000 1611000000
2012 44061443932 1698000000 67% 11173000000 567000000 964000000
MorphoSys AG 2015 1340000000 79000000 100% 106200000 14900000 17200000
2014 1992234848 56000000 100% 63980000 -3000000 -5900000
2013 1289011708 50000000 81% 77960000 10200000 9910000
2012 688226584 37700000 100% 51900000 1900000 2500000
msg life ag 2015 109110000 1500000 19% 108100000 4690000 6000000
2014 82146034.48 1500000 20% 104340000 -1000000 4000000
2013 71485862.07 1340000 14% 131000000 -5000000 -5000000
2012 65842241.38 1350000 14% 138000000 -24000000 -14000000
Muehlhan AG 2015 31390000 1500000 17% 239000000 1000000 5000000
2014 31390000 1500000 18% 218000000 2000000 8000000
2013 18191931.82 1367000 17% 208000000 2000000 5000000
2012 16170606.06 1356000 18% 186000000 2000000 4000000
OSRAM Licht AG 2015 4850000000 334000000 36% 3785000000 397740000 414000000
2014 3279278266 345000000 33% 3572000000 166000000 289000000
2013 4064639133 345000000 32% 5142000000 188000000 281000000
2012 2366990391 345000000 29% 5289000000 28000000 92000000
Sartorius AG Vz. 2015 4900000000 52400000 50% 1114800000 126120000 211000000
2014 2067251462 50400000 48% 891200000 48520000 128000000
2013 1745906433 50400000 49% 792000000 52000000 114000000
2012 1401228070 50400000 49% 846000000 49000000 121000000
Schaltbau
Holding AG 2015 183350000 50400000 51% 502000000 17450000 36000000
2014 254054381.4 50400000 50% 437000000 24800000 27000000
2013 275476304.6 50000000 50% 394000000 21000000 36000000
2012 187441828 50000000 50% 364000000 19000000 30000000
Schweizer
Electronic AG 2015 68110000 38000000 21% 115600000 5000000 9000000
2014 78402177.78 38000000 22% 110220000 6000000 10000000
2013 74429094.44 29000000 2% 101000000 6000000 10000000
2012 56001555.56 28000000 53% 100000000 1000000 5000000
77
SGL Carbon SE 2015 973140000 38000000 19% 1322950000 -295000000 18000000

2014 1030957731 38000000 17% 1335600000 -247000000 -21000000
2013 2163284213 24500000 19% 1423000000 -317000000 3000000
2012 2321719815 23700000 28% 1646000000 6000000 148000000
Sixt AG St. 2015 2200000000 38000000 63% 2179300000 115900000 222000000
2014 1496280553 38000000 68% 1650000000 110000000 199200000
2013 1089479277 38000000 74% 1510000000 94800000 173600000
2012 747672688.6 38000000 60% 1596000000 79200000 167830000
Symrise AG 2015 7460000000 169000000 43% 2601700000 246000000 385000000
2014 7460000000 139000000 42% 2120100000 180000000 317000000
2013 4994684505 100000000 42% 1830000000 172000000 269000000
2012 4108362620 98000000 40% 1735000000 157000000 235000000
SolarWorld 2015 40110000 150000 36% 796000000 -33300000 -20000000
2014 193229543.7 150000 33% 602000000 -35000000 -57000000
2013 7167946.768 120000 18% 457000000 -228000000 -209000000
2012 16776045.63 110000 -2% 609000000 -606000000 -370000000
Telefónica
Deutschland
Holding AG 2015 12110000000 150000 24% 7888000000 -383000000 -309000000
2014 13025634146 150000 50% 5522000000 -720000000 212000000
2013 17810560976 113000 53% 5007000000 78000000 35000000
2012 16924463415 110000 52% 5273000000 1335000000 146000000
USU Software
AG 2015 200570000 10500000 53% 66090000 8380000 7000000
2014 144607144.4 9600000 53% 58930000 5550000 6000000
2013 100995465.9 8900000 52% 56000000 4000000 3000000
2012 76839623.98 7800000 49% 51000000 5000000 5000000
UZIN UTZ AG 2015 271380000 9600000 59% 253200000 13700000 18000000
2014 145778475.8 9600000 57% 230350000 10900000 15000000
2013 114201546.5 8900000 55% 217000000 10000000 12000000
2012 97000695.17 8900000 55% 208000000 9000000 12000000
Vectron Systems
AG 2015 104740000 9600000 67% 27000000 1000000 2000000
2014 104740000 9600000 67% 22420000 1000000 1000000
2013 72396768.64 7800000 65% 23000000 1000000 1000000
2012 106542409.2 8000000 61% 23000000 1000000 1000000
Viscom AG 2015 120960000 9600000 68% 69390000 4000000 10000000
2014 120960000 9600000 66% 62250000 7000000 9000000
2013 130869456.8 8900000 72% 50000000 5000000 7000000
2012 82830133.57 6700000 74% 50000000 7000000 9000000
WACKER
CHEMIE AG 2015 4750000000 175000000 21% 5296200000 246700000 358000000
2014 4750000000 18310000 17% 4826400000 203800000 191000000
2013 4185664182 17800000 15% 4479000000 100000000 58000000
2012 2641029154 17800000 18% 4635000000 121000000 171000000
Wincor Nixdorf
AG 2015 2170000000 94500000 24% 2578970000 100600000 198000000
2014 1892868604 90000000 18% 2427000000 6470000 22000000
2013 2409490460 98000000 22% 2469000000 101000000 155000000
2012 1691489592 99000000 23% 2343000000 87000000 101000000
XING AG 2015 965260000 90000000 63% 120000000 1790000 26000000
2014 965260000 90000000 61% 99000000 6000000 22000000
2013 757701439.2 7800000 59% 83000000 9000000 16000000
2012 427103474.8 6700000 58% 72000000 8000000 14000000
zooplus AG 2015 846160000 90000000 27% 739000000 7900000 14000000
2014 846160000 90000000 27% 570000000 5200000 9000000
2013 659347116.3 67890000 30% 426000000 2000000 5000000
2012 429413724.5 69000000 32% 335000000 -2000000 -2000000

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Running head: THE IMPACT OF CROSS-LISTING ON THE VALUE OF HIGH-TECH

THE IMPACT OF CROSS-LISTING ON THE VALUE OF HIGH-TECH COMPANIES

Presented to the Faculty of Finance Programme

at ISM University of Management and Economics

in Partial Fulfillment of the Requirements for the Degree of

Thesis: Finance. Vilnius, ISM University of Management and Economics, 2016.

between the cross-listed and domestically listed companies.

Keywords: cross-listing; high-tech industry; growth of value; operating performance.

bakalauro baigiamasis darbas: finansai. Vilnius, ISM vadybos ir ekonomikos universitetas,

kokybiškesnes verslo kompetencijas ar didesnes akcinio kapitalo lėšas. Tačiau tiesioginė

užsienio ir vietinėse rinkose.

Dvi imtys: viena, Vokietijos aukštųjų technologijų įmonių, leidžiančių akcijas

užsienyje listinguojamų įmonių augimą.

Reikšminiai žodžiai: listingavimas keliose rinkose; aukšųjų technologijų sektorius; įmonės

vertės augimas, veiklos rezultatai.

Graph 1. R&D expenditure ................................................................................................................ 13

Graph 2. High-Tech startup density ................................................................................................... 14

Graph 3. Percentage of cross-listing in U.S. from different markets................................................... 19

Graph 4. Cross-listing by sectror in U.S............................................................................................. 20

Graph 5. Market capitalization of high-tech companies, listed in U.S. markets .................................. 39

Table 2. Fixed effects regression for Frankfurt-listed companies. ...................................................... 42

Table 4. Fixed effects regression for cross-listed companies. ............................................................. 45

Table 5. t-test for independent variable: revenues. ............................................................................. 47

Table 7. Medians of revenues, earned during 2012-2015 ................................................................... 48

Table 8. Medians of investment in R&D during 2012-2015. .............................................................. 50

Table 9. Medians of EBIT during 2012-2015..................................................................................... 50

because it depends on many circumstances, such as industry, size of a company, domestic

1. To review the industy of European stock exchanges, especially Frankfurt stock

2. To analyze the industry of high-tech companies in Europe, identify the centres of

high-tech and the main trends of listing of such companies.

3. To overview the academic literature, which analyzes the reasons of companies‘

ratios by building a regression model.

which market leads to higher growth ratios.

estimate if theoretical ideas work in real cases of German companies.

ratios, growth and economy conditions.

Importance of high-tech sector

High technology (abbreviated as high-tech) can be defined in numerous different

knowledge creation and transfer or percentage of technical workers involved in the

Technology, Telecommunications, Pharmaceuticals & Biotechnology, Technolology

High-tech sector is gaining an extremely huge importance worldwide, because

companies are relying on more advanced technologies, innovative ways of organizing

Degree of countries‘ innovation

technology in a country, is investment in research and development (R&D) as a percentage of

encouraged to involve themselves into high-tech being supported by various organisations,

such as The Federation of German Industry or Germany Trade&Invest.

As the different data shows, Germany is considered to be the most technologically

companies, as a percentage of domestic listed companies. Since the Innovation index is

However, these cities are far beyond the worldwide ratios.

HIGH-TECH STARTUP DENSITY

Tel Aviv 0,85

Europe Average 0,6

United States 1,85

companies hosted, venture capital attracted, technologies developed. According to research of

incentives to support enterprises.

In addition to this, taxation system in Germany, compared with other developed

economies, is considered to be not so harsh for enterprises. Comparing taxation revenues

Medical Technology, Biotechnology and Pharmaceuticals (41 company). Also, high-tech

Moreover, capitalization of high-tech sector in Frankfurt stock exchange is surpassed only by

Summarizing different researches and statistical data, it seems that companies in

High-tech trends in Lithuania

High-tech industry in Lithuania is still underdeveloped area and the majority of