The Decision to Cross-List: The Case of Chinese IPOs and ADRs

39 Pages Posted: 22 Jun 2008

See all articles by Xinde Zhang

Xinde Zhang

Valdosta State University - Langdale College of Business Administration

Tao-Hsien Dolly King

University of North Carolina (UNC) at Charlotte - Department of Finance

Date Written: June 20, 2008

Abstract

This paper examines the cross-listings by Chinese companies in Hong Kong, Singapore, and the U.S. markets from 1993 to 2005. Our sample consists of 101 firms cross-listed in Hong Kong, 43 firms in the U.S. and 77 firms in Singapore and a sample of 1,247 domestic listings. We find that the limitations of the domestic markets motivate the issuers to cross-list overseas. We also find that issuers are motivated to cross-list due to the legal and economic environments of the foreign markets, a better access to capital markets, and a lower cost of capital. The results of the Cox hazard model suggest that lower-leveraged, larger, and better-performing firms in the developed regions of China are more likely to cross-list. The multinomial probit model regressions indicate that, relative to their domestic counterparts, the firms cross-listed in the three foreign markets have lower leverage ratios and a larger EBITDA. However, the firms cross-listed in Singapore are significantly smaller in size and are more likely from the developed region. Subsequent to the cross-listing events, the issuers experience a significant increase in sales, total assets, and total profits, but a significant drop in profit margins. Excess returns after the cross-listings are generally negative for cross-listed stocks. Finally, underpricing is most severe in the listings on Chinese exchanges and the cross-listings on NASDAQ.

Keywords: Cross-listings, IPOs, ADRs

JEL Classification: G32

Suggested Citation

Zhang, Xinde and King, Tao-Hsien Dolly, The Decision to Cross-List: The Case of Chinese IPOs and ADRs (June 20, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1148946 or http://dx.doi.org/10.2139/ssrn.1148946

Xinde Zhang

Valdosta State University - Langdale College of Business Administration ( email )

Valdosta,, GA 31698,
United States

Tao-Hsien Dolly King (Contact Author)

University of North Carolina (UNC) at Charlotte - Department of Finance ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
704-687-7652 (Phone)
704-687-6987 (Fax)

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