The decision to list abroad: The case of ADRs and foreign IPOs by Chinese companies
This paper examines the decision to list abroad by Chinese companies in the form of ADRs and foreign IPOs from 1993 to 2005. Our sample consists of 33 ADRs, 218 foreign IPOs, and a sample of 1418 domestic listings. We find evidence to support that issuers are motivated to cross-list due to the legal and accounting standards of the foreign markets, more stringent listing requirements and closer regulatory monitoring, significant demands for external capital due to rapid growth, an expanded shareholder base, and foreign expertise. The motives and firm factors differ by the type of issue (ADR versus foreign IPO) and by the market in which the foreign exchange is located (Hong Kong versus Singapore). Subsequent to the listing events, issuers experience a significant drop in profitability, tangible assets ratio, and asset turnover. There is no significant change in capital expenditure. Stock returns after the listing events are generally negative for ADR and foreign IPO stocks. More significantly, these stocks under-perform the market in the post-event window ranging from 3 days to 3 years.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marc Goergen & Arif Khurshed & Ram Mudambi, 2006. "The Strategy of Going Public: How UK Firms Choose Their Listing Contracts," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1-2), pages 79-101.
- Pagano, Marco & Röell, Ailsa A & Zechner, Josef, 2001.
"The Geography of Equity Listing: Why Do Companies List Abroad?,"
CEPR Discussion Papers
2681, C.E.P.R. Discussion Papers.
- Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002. "The Geography of Equity Listing: Why Do Companies List Abroad?," Journal of Finance, American Finance Association, vol. 57(6), pages 2651-2694, December.
- Marco Pagano & Ailsa A. Roell & Joseph Zechner, 1999. "The Geography of Equity Listing; Why Do Companies List Abroad?," CSEF Working Papers 28, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Sep 2001.
- Puri, Manju, 1999. "Commercial banks as underwriters: implications for the going public process," Journal of Financial Economics, Elsevier, vol. 54(2), pages 133-163, October.
- Armando Gomes, 2000. "Going Public without Governance: Managerial Reputation Effects," Journal of Finance, American Finance Association, vol. 55(2), pages 615-646, 04.
- Karolyi, G. Andrew, 2004.
"The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom,"
Working Paper Series
2004-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- G. Andrew Karolyi, 2006. "The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom," Review of Finance, European Finance Association, vol. 10(1), pages 99-152.
- Sun, Qian & Tong, Wilson H. S., 2003. "China share issue privatization: the extent of its success," Journal of Financial Economics, Elsevier, vol. 70(2), pages 183-222, November.
- Sergei Sarkissian, 2004. "The Overseas Listing Decision: New Evidence of Proximity Preference," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 769-809.
- James S. Ang & James C. Brau, 2002. "Firm Transparency and the Costs of Going Public," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(1), pages 1-17.
- Doidge, Craig, 2004. "U.S. cross-listings and the private benefits of control: evidence from dual-class firms," Journal of Financial Economics, Elsevier, vol. 72(3), pages 519-553, June.
- Franklin Allen & Jun Qian & Meijun Qian, 2002.
"Law, Finance, and Economic Growth in China,"
Center for Financial Institutions Working Papers
02-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Stephen R. Foerster & G. Andrew Karolyi, 1999. "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States," Journal of Finance, American Finance Association, vol. 54(3), pages 981-1013, 06.
- Xiaozu Wang & Lixin Colin Xu & Tian Zhu, 2004. "State-owned enterprises going public "The case of China"," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 467-487, 09.
- Susana Alvarez & Victor Gonzalez, 2005. "Performance of Spanish firms going public: windows of opportunity and the informative effect," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1283-1297.
- Mello, Antonio S. & Parsons, John E., 1998. "Going public and the ownership structure of the firm," Journal of Financial Economics, Elsevier, vol. 49(1), pages 79-109, July.
- Gustavo Grullon & Roni Michaely, 2004. "The Information Content of Share Repurchase Programs," Journal of Finance, American Finance Association, vol. 59(2), pages 651-680, 04.
- Shahrokh M Saudagaran, 1988. "An Empirical Study of Selected Factors Influencing the Decision to List on Foreign Stock Exchanges," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 101-127, March.
- Li, Yuming & Yan, Daying & Greco, Joe, 2006. "Market segmentation and price differentials between A shares and H shares in the Chinese stock markets," Journal of Multinational Financial Management, Elsevier, vol. 16(3), pages 232-248, July.
- Yang, Ting & Lau, Sie Ting, 2005. "U.S. cross-listing and China's B-share discount," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 334-353, October.
- Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio L., 2006. "Stock market development and internationalization: Do economic fundamentals spur both similarly?," Journal of Empirical Finance, Elsevier, vol. 13(3), pages 316-350, June.
When requesting a correction, please mention this item's handle: RePEc:eee:mulfin:v:20:y:2010:i:1:p:71-92. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.