Can cross-listing improve investment efficiency? Empirical evidence from China

Abstract

With two views of 'premium' and 'discount,' traditional cross-listing motivation theory emphasises the effect of cross-listing on enterprise performance. The effect of cross-listing on enterprise performance is yet uncertain, manifesting that unknown factors play intermediate roles between them. To clarify the influence mechanism of cross-listing on enterprise performance, this study overcame the limitations in simple verification of the relationship between cross-listing and enterprise performance, and returned to the origin of cross-listing, namely, enterprise financing activity. Thus, the relationship between cross-listing and enterprise investment efficiency was analysed to determine the influence mechanism of cross-listing on enterprise performance. Based on financial data of A þ H cross-listed enterprises and A-share listed enterprises in Mainland China during 2008-2018, the effect of crosslisting on enterprise inefficient investment behaviours was empirically analysed. Results showed that 58.12% of the listed enterprises in China underwent under-investment (UI). Among them, cross-listed enterprises universally underwent over-investment (OI). Cross-listing remarkably remitted UI, but it further expanded OI. Overall, cross-listing led to the deterioration of investment efficiency. The effect of cross-listing on investment efficiency was discussed by combining basic economic activities of enterprises. Cross-listing theory was further enriched and perfected, and suggestions and countermeasures for improving enterprise performance by elevating investment efficiency were put forward.

Influence of Cross-Listing on the Relationship between Financial Leverage and R&D Investment: A Sustainable Development Strategy

“…Finally, we analyzed this issue by using a unique sample: international businesses cross-listing in the U.S. stock market. Previous studies thought that firms make crosslistings to obtain more financial resources [4,27,28]. This research finds that cross-listing activities can positively improve the growth and value of firms.…”

“…We revisit the conundrum by analyzing cross-listing events on major U.S. stock exchanges, a new perspective never used to study the impact of financial leverage (i.e., debt ratio) on R&D investment. The previous studies indicate that firms implement cross-listing introductions to obtain an international reputation and greater financial resources [4,27,28]. These cross-listing activities positively advance both firm growth and corporate value.…”