The Overseas Listing Puzzle: Post-IPO Performance of Chinese Stocks and ADRs in the U.S. Market

Posted: 23 Jun 2012 Last revised: 18 Jul 2014

Yongli Luo

Wayland Baptist University, School of Business

Fang Fang

University of Texas-Pan American

Omar A. Esqueda

Tarleton State University - Department of Accounting, Finance, & Economics

Date Written: June 22, 2012

Abstract

The “China concepts stock” in the U.S. has attracted a great deal of attention among international investors due to the fast growth in Chinese economy. This paper examines the aftermarket performance and the motivations to list in the U.S. for Chinese firms over 1993-2010 by considering the great impact of split-share structure reform in China. We find that the Chinese firms in the U.S. generally underperform the benchmark and industry peers in the post-IPO period of three years. The Chinese cross-listing ADRs show superior performance relative to the single-listings in the long run. It seems that more stringent listing requirements and accounting standards help to improve the corporate governance and operating performance of the Chinese firms. The evidence also supports that the Chinese issuers are motivated to cross-list in the U.S. due to over-investment incentives, leverage effects or free-cash-flow signaling, which is consistent with agency theory and signaling hypothesis.

Keywords: American depositary receipts, Initial public offerings, Cross-listing, Chinese stocks

JEL Classification: G12, G15, G24, G32

Suggested Citation

Luo, Yongli and Fang, Fang and Esqueda, Omar A., The Overseas Listing Puzzle: Post-IPO Performance of Chinese Stocks and ADRs in the U.S. Market (June 22, 2012). Journal of Multinational Financial Management, 22 (5),193-211.. Available at SSRN: https://ssrn.com/abstract=2089543

Yongli Luo (Contact Author)

Wayland Baptist University, School of Business ( email )

1900 West 7th St., CMB 1268
Plainview, TX 79072
United States

HOME PAGE: http://www.wbu.edu

Fang Fang

University of Texas-Pan American ( email )

1201 W. University Drive
Department of Economics and Finance
Edinburg, TX 78539
United States

Omar A. Esqueda

Tarleton State University - Department of Accounting, Finance, & Economics ( email )

Stephenville, TX 76402
United States
(254)968-9908 (Phone)

HOME PAGE: http://tarleton.edu

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