Corporate Governance Reforms and Cross‐Listings: International Evidence*

Abstract

In this study, we examine whether a country's implementation of major corporate governance reforms affects firms' cross-listing activities. Cross-listing is important in overcoming international investment barriers and thus it is worth investigating whether enhanced corporate governance at the country level contributes to the integration of international capital markets. Using a differencein-differences research design, we predict and find that following the implementation of corporate governance reforms in their home countries, firms are more likely to engage in cross-listing activities and tend to cross-list in host countries with stronger investor protection and more developed markets than those in countries with no reforms in the same period. The results from country-level cross-sectional tests indicate that this effect is greater for firms in home countries with weaker investor protection and less developed stock markets in the prereform period. The reforms also have a stronger effect on firms subject to less analyst following and greater external finance dependence. Finally, we find a stronger association between cross-listing activities and institutional ownership after the reforms. Taken together, this study increases understanding of the trade-off between cross-border capital supply and demand. Our finding suggests that country-level corporate governance plays an important role in facilitating the supply of cross-border capital, which in turn incentivizes firms to cross-list. Our study also offers policy implications for national stock exchanges and securities regulators by suggesting that countries without well-developed capital markets should strengthen their corporate governance to improve firms' ability to raise external financing and attract cross-border capital flows.

Mapping the intellectual structure and demystifying the research trend of cross listing: a bibliometric analysis

“…In contrast, Siegel (2005) criticises the failure of the security exchange commission to protect minority shareholders' interests. A recent study by Liao et al (2022) suggests that countries with less developed equity markets should strengthen their corporate governance mechanisms to incentivise firms for external financing. Moreover, foreign board membership would enhance the trustfulness of the firm by raising CSR disclosure (Garanina and Aray, 2021).…”

Does the market reward meeting or beating analyst earnings forecasts? Empirical evidence from China

“…The literature commonly considers institutional investors as another type of external monitor that can constrain self-serving managers from manipulating financial information through monitoring or even direct intervention (Goranova & Ryan, 2014; Lemma, Negash, Mlilo, & Lulseged, 2018; Liao, Tsang, Wang, & Zhu, 2022). Compared with common investors, institutional investors hold more shares, are more financially literate and have more resources.…”

The Effectiveness of Gender Diversity Reforms and the Impact of a Familial Culture: A Spillover Effect on Board Independence

“…However, we acknowledge that endogeneity concerns could still arise not only because our dependent variables and control variables could be equally associated with unobservable characteristics, but also because companies' behaviour towards board composition could be influenced by global perceptions prior to the exogenous shock from the reforms (Ararat, Claessens and Yurtoglu, 2021). Therefore, to test whether these missing factors have an impact on our estimated results, we perform a placebo test (Chen et al, 2020;Liao et al, 2021) by allocating to each firm a random gender reform year as the quasi-year and repeating the DiD analysis from Table 4 (see Table 7, Panel A). The non-significant estimators confirm the validity of our findings by indicating that unobserved factors or pre-existing global perceptions of board composition do not drive the estimated results.…”

“…, 2020; Liao et al. , 2021) by allocating to each firm a random gender reform year as the quasi‐year and repeating the DiD analysis from Table 4 (see Table 7, Panel A). The non‐significant estimators confirm the validity of our findings by indicating that unobserved factors or pre‐existing global perceptions of board composition do not drive the estimated results.…”