The Decision to List Abroad: The Case of ADRs and Foreign IPOs by Chinese Companies

38 Pages Posted: 26 Feb 2009

See all articles by Tao-Hsien Dolly King

Tao-Hsien Dolly King

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

Xinde Zhang

Valdosta State University - Langdale College of Business Administration

Date Written: February 26, 2009

Abstract

This paper examines the decision to list abroad by Chinese companies in the form of ADRs and foreign IPOs from 1993 to 2005. Our sample consists of 33 ADRs, 218 foreign IPOs, and a sample of 1,418 domestic listings. We find evidence to support that issuers are motivated to cross-list due to the legal and accounting standards of the foreign markets, more stringent listing requirements and closer regulatory monitoring, significant demands for external capital due to rapid growth, an expanded shareholder base, and foreign expertise. The motives and firm factors differ by the type of issue (ADR versus foreign IPO) and by the market in which the foreign exchange is located (Hong Kong versus Singapore). Subsequent to the listing events, the issuers experience a significant drop in profitability, tangible assets ratio, and asset turnover. There is no significant change in capital expenditure. Stock returns after the listing events are generally negative for ADR and foreign IPO stocks. More significantly, these stocks under-perform the market in the post-event window ranging from three days to three years.

Suggested Citation

King, Tao-Hsien Dolly and Zhang, Xinde, The Decision to List Abroad: The Case of ADRs and Foreign IPOs by Chinese Companies (February 26, 2009). Available at SSRN: https://ssrn.com/abstract=1349850 or http://dx.doi.org/10.2139/ssrn.1349850

Tao-Hsien Dolly King

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)

Xinde Zhang (Contact Author)

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

Valdosta,, GA 31698,
United States

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