Cross-Listing and the Pricing Efficiency: The Informational and Anchoring Role Played by the Reference Price

49 Pages Posted: 13 Feb 2009

See all articles by Eric C. Chang

Eric C. Chang

University of Hong Kong - School of Business

Jinjuan Ren

University of Macau

Date Written: February 13, 2009

Abstract

For a firm cross-listed in multiple markets, the price of the first-issued share arguably serves as a reference in the pricing of the subsequently-issued share. We argue that this reference role contains both an informational and an anchoring aspect, and that the relative importance of the anchoring effect increases with the noisiness of the reference. We examine a group of Chinese firms that first issued foreign shares and then domestic A-shares. For this sample, besides its informational role, the foreign share price is hypothesized to anchor down the A-share offer price. Empirical results support our dual-role hypotheses.

Keywords: cross-listing, segmented market, anchoring, IPO underpricing

JEL Classification: G12, G14, G15, G24

Suggested Citation

Chang, Eric Chieh C. and Ren, Jinjuan, Cross-Listing and the Pricing Efficiency: The Informational and Anchoring Role Played by the Reference Price (February 13, 2009). Available at SSRN: https://ssrn.com/abstract=1342244 or http://dx.doi.org/10.2139/ssrn.1342244

Eric Chieh C. Chang (Contact Author)

University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

Jinjuan Ren

University of Macau ( email )

Room 4079, E22, Faculty of Business Administration
University of Macau
Taipa, Taipa Nil
Macau
(853) 8822-4185 (Phone)

HOME PAGE: http://www.umac.mo/fba/staff/susanren.html

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