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The Bonding Hypothesis in Poor Governance Environments: Empirical Data from an International Firm Level

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  • Chao-Lung Lien
  • Chien-An Wang

Abstract

The bonding hypothesis is based on the controlling shareholder in an environment of host-exchange governance voluntarily restricting its private benefits. The authors examine both the relative merits of the bonding hypothesis in poor governance environments and cross-listing decisions that have a preemptive monitoring aspect. They then examine the corporate governance of firms before and after cross-listing. This is done by collecting data on 1,005 cross-listed firms concerning the period 1995-2009. The main results indicate that environmental constraints are different in the home market and host exchange and that a strict governance environment is positively related to the probability of cross-listing. Furthermore, a firm's corporate governance is related to improving the governance environment.

Suggested Citation

  • Chao-Lung Lien & Chien-An Wang, 2012. "The Bonding Hypothesis in Poor Governance Environments: Empirical Data from an International Firm Level," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S3), pages 45-67, September.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:s3:p:45-67
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