Cross-Listing and Corporate Malfeasance: Evidence from P-Chip Firms

Posted: 14 Dec 2014 Last revised: 17 Apr 2018

See all articles by Andrei Filip

Andrei Filip

Catholic University of Lille - IESEG School of Management

Zhongwei Huang

Fudan University - School of Management

Daphne Lui

ESSEC Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2017

Abstract

The rapid growth of the private sector in China in recent decades has resulted in a large number of capital-hungry private sector firms. An increasing number of these firms choose to raise equity capital on international exchanges, which typically have stronger disclosure, corporate governance, and investor protection regulations. In light of international investors' and regulators' concerns about the corporate finance practice of China's private sector firms, particularly regarding the integrity of their reported earnings, we investigate whether these firms aggressively manipulate their accounts by examining those listed in Hong Kong, commonly known as P-chips. We find systematic evidence that P-chips engage in more earnings management and other corporate misbehaviors than their counterparts in Hong Kong. We posit and provide evidence consistent with cross-jurisdictional enforcement difficulty as a possible explanation for P-chips' questionable practices, and discuss its implications.

Keywords: China's private sector; P-chips; Enforcement difficulty; Corporate malfeasance

JEL Classification: M41; G32

Suggested Citation

Filip, Andrei and Huang, Zhongwei and Lui, Daphne, Cross-Listing and Corporate Malfeasance: Evidence from P-Chip Firms (July 3, 2017). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2537490

Andrei Filip

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

Zhongwei Huang (Contact Author)

Fudan University - School of Management ( email )

670 Guoshun Road
Shanghai, 200433
China

Daphne Lui

ESSEC Business School ( email )

Av Bernard Hirsch
Cergy-Pontoise 95021
France

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