Cross-Listing, Firm-Specific Information, and Corporate Governance: Evidence from Chinese A-Shares and H-Shares

39 Pages Posted: 9 Nov 2014 Last revised: 13 Nov 2014

See all articles by Shan Li

Shan Li

Xiamen University - Institute for Financial and Accounting Studies

Paul Brockman

Lehigh University - College of Business

Ralf Zurbruegg

University of Adelaide; Financial Research Network (FIRN)

Date Written: April 8, 2014

Abstract

We examine the impact of cross-listing on firm-specific information utilizing the unique features of the Chinese capital markets. By separating the trading activity of domestic Chinese investors from that of foreign non-Chinese investors, we are able to isolate each investor group’s relative ability to impound firm-specific information into stock prices. We show that the cross-listed H-shares traded by foreign investors incorporate significantly more firm-specific information than their A-share counterparts traded by domestic Chinese investors. We find a similar pattern between H-shares and A-shares even after a 2007 regulatory change that allowed domestic Chinese investors to trade in the H-share market. This finding suggests that while institutional factors (e.g., stricter listing rules, stronger investor protection) can explain some of the benefits of cross-listing, foreign investors’ ability to utilize firm-specific information plays a separate and distinct role in generating cross-listing benefits. The level of information improvement due to foreign investors depends on the quality of the cross-listed firm’s corporate governance.

Keywords: Cross-listing; Firm-specific information; Corporate governance

JEL Classification: G14; G15; G38

Suggested Citation

Li, Shan and Brockman, Paul and Zurbruegg, Ralf, Cross-Listing, Firm-Specific Information, and Corporate Governance: Evidence from Chinese A-Shares and H-Shares (April 8, 2014). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2520723

Shan Li (Contact Author)

Xiamen University - Institute for Financial and Accounting Studies ( email )

Xiamen, Fujian 361005
China

Paul Brockman

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

Ralf Zurbruegg

University of Adelaide ( email )

233 North Terrace
Department of Finance
Adelaide SA 5005
Australia
+61 8 8303 5535 (Phone)
+61 8 8303 4368 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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