Does bonding really bond? Liability of foreignness and cross-listing of Chinese firms on international stock exchanges

Li Xian Liu, Fuming Jiang and Milind Sathye

Research in International Business and Finance, 2017, vol. 41, issue C, 109-124

Abstract: This study examines the relationship between cross-listing and firm valuation in the context of Chinese firms cross-listed on major international exchanges, such as the NASDAQ, New York Stock Exchange (NYSE), Hong Kong Main Board, Hong Kong Growth Enterprise Market (GEM), Singapore Stock Exchange, and London Alternative Investment Market (LAIM). Through the lenses of bonding theory and liability of foreignness-based multinational enterprise theories, two sets of alternative hypotheses are developed and tested using panel data over a period of twelve years during 2001–2012. Contrary to the bonding theory, the results reveal that the firms listed in Mainland China recorded better valuation than the firms cross-listed on the international stock exchanges. The more sophisticated corporate governance mechanisms applied in international stock exchanges do not always entail better firm valuation. Institutional distance, cultural distance and the distance in economic freedom between China and the cross-listing location countries interact with governance variables negatively affecting performance of cross-listed firms. The direct negative impact of the three distance variables on the firm valuation is also statistically significant. The outcome of Chinese firms’ cross-listing behaviours appears to contradict the general bonding theory.

Keywords: Corporate governance; Chinese cross-listing; Bonding hypothesis; Liability of foreignness; Institutional distance; Economic freedom; Cultural distance (search for similar items in EconPapers)
JEL-codes: G1 G3 Z1 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:41:y:2017:i:c:p:109-124

DOI: 10.1016/j.ribaf.2017.04.033

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