Chinese cross-listing

Liu, L 2011, Chinese cross-listing, Doctor of Philosophy (PhD), Economics, Finance and Marketing, RMIT University.


Document type: Thesis
Collection: Theses

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Title Chinese cross-listing
Author(s) Liu, L
Year 2011
Abstract With the increasing presence of Chinese companies listed and traded in the international stock markets, research on Chinese cross-listing is emerging as a new focus for academic research in the field. A number of studies have investigated the price disparity and price discovery between dual-listed Chinese securities (focus on Hong Kong and New York dual-listings); yet little is known about how bonding effects Chinese firms cross-listed in international stock markets, the price and market linkage among those dual- and triple-listed shares, and whether investment strategies could be developed from the price disparity phenomenon between dual-listed shares.

Building upon the existing literature on cross-listing, and using the data of listed Chinese companies during the period of 1993–2008, this study examines the relevance of the theories of the bonding hypothesis, cointegration and the law of one price in the context of Chinese firms’ cross-listing in the international capital markets. The results suggest that Chinese cross-listings exhibit a bonding premium only in the United States (US) markets, while the non-cross-listed Chinese firms demonstrate better firm performance than those listed in London, Singapore and Hong Kong. Further, the results reveal that for all the listed Chinese firms, profitability rate and the leverage ratio play a positive role in improving the firms’ performance. The adoptions of international accounting standards as a must-to-do corporate governance mechanism regulated by the host stock exchanges has less effects on Chinese firms’ performance, but the adoption of Big Four auditing firms does. And the interaction between cross-listing with different corporate governance mechanisms have different effects on firms’ valuation. The study suggests that merely borrowing a corporate governance mechanism does not guarantee the improvement of the firm performance.

Instead of using market indices, this study examines the short and long-term price linkages among the dual- and triple-listed Chinese securities in different stock markets over the period of 1993–2008. The empirical results reveal that most of the dual-listings traded in China A- and B-share markets, and the Hong Kong and New York stock markets exhibit a stationary long-run relationship. Some of the dual-listed China A- and H-share also exhibit cointegrated relationship. The results also suggest that Hong Kong and New York markets have a very strong interactive relationship in terms of the dual-listed stocks. The stock’s total return index series for those cross-listed Chinese stocks are cointegrated and pricing errors are corrected almost immediately. Lastly, arbitrage opportunities for the 14 pairs of Chinese American Depository Receipts (ADRs) and their underlying shares traded in New York and Hong Kong markets were examined. It was revealed that a portfolio of 14 dual listed stocks earns an average daily return of 1.28 per cent over the period studied when transaction costs were considered and market risk was controlled.
Degree Doctor of Philosophy (PhD)
Institution RMIT University
School, Department or Centre Economics, Finance and Marketing
Keyword(s) Cross-listing
corporate governance
bonding theory
cointegration
arbitrage
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Created: Thu, 12 Jan 2012, 15:56:38 EST by Guy Aron
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