When does internationalization enhance the development of domestic stock markets?

We develop a model to examine the impact of international cross-listing on domestic market liquidity and trading volume to determine when domestic mar ket development is likely to follow. Greater information transparency betwe en markets increases domestic market liquidity and volume, resulting in mar ket development. Conversely, post-listing order flow migration away from th e domestic market reduces its liquidity and volume, resulting in retardatio n. The net impact is positive and greater when market professionals acquire rather than reveal information, for smaller previously restricted markets, and for cross-listings in larger more transparent markets that have a grea ter potential to expand the shareholder base. Journal of Economic Literatur e Classification Numbers: D44, D82, F36, G15. (C) 1998 Academic Press.