Political Relations and Overseas Stock Exchange Listing: Evidence from Chinese State-Owned Enterprises

47 Pages Posted: 17 Mar 2008

See all articles by Mingyi Hung

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

T.J. Wong

University of Sothern California

Tianyu Zhang

City University of Hong Kong (CityUHK) - Department of Accountancy

Date Written: December 10, 2007

Abstract

Using a sample of China's partially privatized state-owned enterprises (SOEs) that emerge in global equity markets, this paper examines the decision to list overseas and its consequences. We find that overseas listing of Chinese SOEs is primarily determined by politicians' economic and political agendas, not by the firms' desire to fund growth and expand foreign sales. While overseas listing is motivated by politicians' incentives rather than individual firms' needs, we also find that overseas listed SOEs have more professional board of directors, less earnings management, and higher investment efficiency than their domestically listed counterparts. Our additional analysis finds evidence suggesting that the observed consequences in firm behaviors are due to increased scrutiny of reputational financial intermediaries. Finally, we find that overseas listed Chinese SOEs have better post-listing stock performance, less underpricing of initial public offering, and greater firm valuation. Taken together, the evidence shows that in overseas listing, politicians are trading off consumption of private benefits for the pursuit of national economic and political agendas. Our study adds to the literature by finding evidence consistent with overseas listing being a credible mechanism constraining politicians from taking excessive private benefits and improving efficiency for partially privatized Chinese SOEs.

Keywords: cross listing, political relation

Suggested Citation

Hung, Mingyi and Wong, T.J. and Zhang, Tianyu, Political Relations and Overseas Stock Exchange Listing: Evidence from Chinese State-Owned Enterprises (December 10, 2007). Available at SSRN: https://ssrn.com/abstract=1098790 or http://dx.doi.org/10.2139/ssrn.1098790

Mingyi Hung

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

T.J. Wong

University of Sothern California ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Tianyu Zhang (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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