Do Cross-Listed Firms Have a Better Governance Structure and Lower Agency Costs? Evidence from Chinese Firms

Dong-Soon Kim, Eunjung Yeo and Li Zhang
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Dong-Soon Kim: School of Business Administration, College of Business & Economics, Chung-Ang University, Seoul 06974, Korea
Eunjung Yeo: School of Business Administration, College of Business & Economics, Chung-Ang University, Seoul 06974, Korea
Li Zhang: School of Business Administration, College of Business & Economics, Chung-Ang University, Seoul 06974, Korea

Sustainability, 2021, vol. 13, issue 4, 1-25

Abstract: This study examines whether an influence from a difference in corporate governance structure exists on firms’ agency costs between Chinese companies cross-listed on the Hong Kong Stock Exchange (HKSE) and those that are domestically listed ones. We determine that, overall, companies with an HKSE cross-listing had better corporate governance than those without. The corporate governance advantage of the HKSE cross-listed firms holds if we control for firm fixed effects and resolve the potential endogeneity problem between corporate governance and agency costs by using two-stage least square (2SLS) regression analysis with instrumental variables. Specifically, the HKSE cross-listed firms had better corporate governance in terms of board size and institutional ownership. By contrast, domestically listed firms experienced the adverse effects of institutional owner’s roles and higher board pay. The advantages of HKSE cross-listed firms may stem from the benefits of having a larger board size and the effective monitoring of the management by the institutional stockholders. Implications are drawn for the debate on cross-listing and the future challenges of Chinese firms, and a more robust monitoring is necessary for sustainable finance of their stock markets.

Keywords: cross-listing; corporate governance; agency costs; Chinese firms (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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