The overseas listing puzzle: Post-IPO performance of Chinese stocks and ADRs in the U.S. market

Luo, Yongli; Fang, Fang; Esqueda, Omar A.

doi:10.1016/j.mulfin.2012.06.008

Cited by 29 publications

(23 citation statements)

References 83 publications

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“…Although it is reported that a significant number of the Chinese firms listed in the U.S. stock exchange were caught against corporate financial fraud in the U.S. market (Ang, Jiang, & Wu, 2016), Luo, Fang, and Esqueda (2012) found that cross-listed Chinese firms saw their corporate governance improved and outperformed those single listings in the United States in the long run. Our institutional arguments can solve this puzzle by explaining how the bonding mechanism through foreign listing substitutes the institutional void in China and exerts stronger governance on cross-listed firms as compared with those only listed domestically.…”

Section: Hypothesesmentioning

confidence: 99%

Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

Yiu

Wan

2018

Journal of Management

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How corporate governance mechanisms function in transition economies is a key topic for corporate governance researchers and policy makers. We propose that alternative governance mechanisms are in place to mitigate corporate fraudulent behaviors in the fluid state of transition economies where the establishment and enforcement of corporate governance legislation are presently insufficient. Drawing on the twin set of institutional logics—the institutional embeddedness logic and the institutional substitution logic—we posit that three salient types of prevailing alternative governance mechanisms (relational, administrative, and foreign governance) play important roles in transition economies because they are complementary to the institutional conditions at the time of the transition process. Conducting a bivariate probit analysis of a matched sample of corporate financial fraud cases in China, we find that strategic alliances, business group affiliation, nontradable state shares, local government ownership, use of foreign auditors, and foreign listing can deter corporate financial fraud, while foreign listing is also effective in detecting fraud. We also find that the deterrence effects of strategic alliances and business group affiliation become weaker as law development improves, while foreign listing and legal governance are completely substitutive. Our study provides a contextualized view of corporate governance that connects its effectiveness with institutionalization and the institutional state of a country. Our study also enriches our understanding of some unfamiliar forms of governance mechanisms that are in place and complementary to a country’s institutional conditions.

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Section: Hypothesesmentioning

confidence: 99%

Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

Yiu

Wan

2018

Journal of Management

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“…Consistent with the investor attention hypothesis, they find that after controlling for risk and liquidity China-name firms outperform non-China-name firms. Luo et al (2012) examine the aftermarket performance of 73 Chinese ADRs, including 59 single-listed and 14 cross-listed. The authors find that cross-listed ADRs outperform their single-listed counterparts and attribute the difference to more stringent listing requirements and accounting standards.…”

Section: Introductionmentioning

confidence: 99%

Chinese single-listed ADRs: returns and volatility

Rodríguez

Toledo

2015

International Journal of Managerial Finance

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Purpose – Single-listed American depositary receipts (ADRs) are traded in US markets, while their underlying share is not listed in the firm’s home market. The purpose of this paper is to empirically examine the factors affecting the returns and volatility of a sample of Chinese single-listed ADRs, in comparison with traditional Chinese ADRs. Design/methodology/approach – The methods used in this paper are similar to those used in the examination of traditional or dual-listed Chinese ADRs. However, motivated by the very nature of single-listed ADRs, the authors estimate a base model which includes factors from the two presumably most important markets for single-listed Chinese ADRs (i.e. the Chinese and US markets). In all of the estimations, the authors follow a two-step procedure. First, the authors estimate a GARCH(1,1) model with the mean equation modeled as an AR(p) process and from those models estimate GARCH (conditional) variances. Findings – In line with the evidence on traditional Chinese ADRs, the authors find that both the Chinese and the US markets are important predictors of single-listed ADR returns. The results are robust to variations in the model specifications. Originality/value – Single-listed ADR return behavior is still an under-researched topic. In this paper, the authors contribute to the literature on Chinese single-listed ADRs by empirically examining the determinants of their mean return and volatility.

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“…The latter results are robust to the country characteristic, yet they do not include controls for firm-level variables. Lastly, Luo, Fang, and Esqueda (2012) show that Chinese firms listed on U.S. exchanges underperform a matching firm during the three post cross-listing years.…”

Section: Background On Cross-listingsmentioning

confidence: 91%

Cross-listing performance and insider ownership: The experience of U.S. investors

Esqueda

Jackson

2015

Journal of Multinational Financial Management

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for providing ownership structure data relevant for this manuscript. We are grateful to Thanh Ngo, Judith Swisher, and Cynthia Brown for providing valuable input. All remaining errors are our own. Highlights  Insider-owned firms pursue U.S. cross-listings following periods of extraordinary performance.  The long-run post-cross-listing abnormal returns turn negative for insider-controlled firms.  The Sarbanes-Oxley Act has mitigated the attempts to time the cross-listing market.  The returns of capital-raising firms are more sensitive to potential agency problems.

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The overseas listing puzzle: Post-IPO performance of Chinese stocks and ADRs in the U.S. market

Cited by 29 publications

References 83 publications

Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

Chinese single-listed ADRs: returns and volatility

Cross-listing performance and insider ownership: The experience of U.S. investors

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