A countrys economic and financial environment in addition to its political stability

play a crucial role in determining how other external institutions relate to it. The
environment could serve as a barrier to both local and foreign investments if it is
not properly and efficiently managed with a great measure of transparency and
accountability.
The analysis demonstrates that there is a long-run association between the risk
ratings (economic, financial and political) and the stock market movements. The
Saudi risk ratings are forcing variables on its stock market index. Economic and
financial risks have significant and positive relationship with stock market index
movements. The sensitivity of the Saudi Arabia financial risk ratings to the
economic and the stock market returns variables in this study is significant. This
suggests that financial risk indicators such as debt servicing, international liquidity
(import cover), balance of payments (current accounts) and exchange rate stability
among others are issues to be considered in any strategic investment decisions.
There is reduced or insignificant political risk sensitivity to other risk factors as
compared to the financial and economic risks. Thus, political risk rating matters are
relatively the least in Saudi Arabia as shown in this study.

Foreign listings are becoming an increasingly important strategic issue for

companies and stock exchanges alike. As companies become global in their product
market and investment strategies, direct access to foreign capital markets via an
equity listing can yield important benefits. At the same time, the international
integration of capital markets has led to unprecedented levels of competition
among stock exchanges. In this competitive struggle, the winners are the
exchanges that manage to attract more foreign listings and the attendant trading
volume and business opportunities. Despite the importance of these issues, still
little is known about which exchanges succeed in capturing more listings from
abroad and why. This question is intimately related with a second issue, namely
which advantages companies expect to get from a foreign listing: securing cheap
equity capital for new investment, allowing controlling shareholders to divest on a
liquid market, preparing for foreign acquisitions, or simply enhancing the companys
reputation.

The principle considerations that drive a companys decision to seek a cross-listing of its shares
on one or more foreign stock exchanges are: 1

1 http://www.tamimi.com/en/magazine/law-update/section-5/september-3/therationale-behind-cross-listing-its-implications-on-corporate-governance.html

Financial gains: Cross-listing is a principle source of corporate financing, and one of the
main reasons for a company to cross-list its shares on a foreign stock exchange is raise capital
funds at a lower cost compared to debt financing. This arises because their stocks become more
available to foreign investors. Their access to these stocks may otherwise be restricted due to
international investment barriers, which hinder them from accessing particular markets.
Increased Liquidity: Cross-listing enables companies to trade their shares in numerous
time zones and multiple currencies. This increases the issuing companys liquidity and gives it
more ability to raise capital. It has been proven that there is a correlation between share
valuation and market liquidity2.
Shares Marketability: Cross-listing assists companies to expand their shareholders base
as it brings foreign securities closer to potential investors. This makes the companys
securities visible or recognised in the foreign market, enabling the company to access additional
cash, if required, by selling debt in the foreign market3.
Marketing and Growth Motivations: Cross-listing in a foreign country will assist the issuing
company in its marketing and cross border expansion plan, as the companys brand and its
products will be identifiable to investors and consumers of the foreign countries, creating new
distributing channels and export opportunities.

Cross-listing is often referred to as the strategy of parallel listing on both domestic

and foreign stock exchanges. Research shows that over the last three decades an
increasing number of companies from both developed and emerging markets have
been cross-listing abroad.