The Economic Consequences of Increased Disclosure: Evidence from Cross-Listings of Chinese Firms

Posted: 9 Apr 2008 Last revised: 31 May 2009

See all articles by Haiyan Zhou

Haiyan Zhou

University of Texas - Pan American

Heibatollah Sami

Lehigh University

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In this paper we investigate the impact of cross-listings on information asymmetry risk, the cost of capital and firm value of a group of cross-listed Chinese companies. Our paper is the first to examine the effect of cross-listing on information asymmetry risk. Because cross-listed firms are subject to increased disclosure requirements, increased regulatory scrutiny and increased legal liability, we propose that Chinese cross-listed firms have lower information asymmetry risk, lower cost of capital and higher firm value than their non-cross-listed counterparts. We find in both univariate and multivariate tests that cross-listed firms enjoyed lower information asymmetry risk in the domestic market compared with the non-cross-listed firms. We also find that cross-listed firms have lower cost of capital in the cross-listing market than non-cross-listed firms in the domestic markets. Finally, we find that cross-listed firms are associated with higher firm value as measured by Tobin's Q. These results have implications for international investors and companies seeking cross-listing opportunities.

Keywords: Increased Disclosure, Cross-listing, Information Asymmetry, Cost of Capital, Firm Value

Suggested Citation

Zhou, Haiyan and Sami, Heibatollah, The Economic Consequences of Increased Disclosure: Evidence from Cross-Listings of Chinese Firms. Journal of International Financial Management and Accounting, Vol. 19, No. 1, pp. 1-27, 2008, Available at SSRN:

Haiyan Zhou (Contact Author)

University of Texas - Pan American ( email )

1201 West University Drive
Edinburg, TX 78539
United States
956-381-3334 (Phone)
956-381-2407 (Fax)

Heibatollah Sami

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3407 (Phone)

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