The Bonding Hypothesis in Poor Governance Environments: Empirical Data from an International Firm Level

Chao-Lung Lien and Chien-An Wang

Emerging Markets Finance and Trade, 2012, vol. 48, issue S3, 45-67

Abstract: The bonding hypothesis is based on the controlling shareholder in an environment of host-exchange governance voluntarily restricting its private benefits. The authors examine both the relative merits of the bonding hypothesis in poor governance environments and cross-listing decisions that have a preemptive monitoring aspect. They then examine the corporate governance of firms before and after cross-listing. This is done by collecting data on 1,005 cross-listed firms concerning the period 1995-2009. The main results indicate that environmental constraints are different in the home market and host exchange and that a strict governance environment is positively related to the probability of cross-listing. Furthermore, a firm's corporate governance is related to improving the governance environment.

Keywords: bonding hypothesis; corporate governance; cross-listing (search for similar items in EconPapers)
Date: 2012
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