Can cross-listing improve investment efficiency? Empirical evidence from China

Hong Xu, Ying Fu and Edmundas Jasinskas

Economic Research-Ekonomska Istraživanja, 2021, vol. 34, issue 1, 1789-1813

Abstract: With two views of ‘premium’ and ‘discount,’ traditional cross-listing motivation theory emphasises the effect of cross-listing on enterprise performance. The effect of cross-listing on enterprise performance is yet uncertain, manifesting that unknown factors play intermediate roles between them. To clarify the influence mechanism of cross-listing on enterprise performance, this study overcame the limitations in simple verification of the relationship between cross-listing and enterprise performance, and returned to the origin of cross-listing, namely, enterprise financing activity. Thus, the relationship between cross-listing and enterprise investment efficiency was analysed to determine the influence mechanism of cross-listing on enterprise performance. Based on financial data of A + H cross-listed enterprises and A-share listed enterprises in Mainland China during 2008–2018, the effect of cross-listing on enterprise inefficient investment behaviours was empirically analysed. Results showed that 58.12% of the listed enterprises in China underwent under-investment (UI). Among them, cross-listed enterprises universally underwent over-investment (OI). Cross-listing remarkably remitted UI, but it further expanded OI. Overall, cross-listing led to the deterioration of investment efficiency. The effect of cross-listing on investment efficiency was discussed by combining basic economic activities of enterprises. Cross-listing theory was further enriched and perfected, and suggestions and countermeasures for improving enterprise performance by elevating investment efficiency were put forward.

Date: 2021
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DOI: 10.1080/1331677X.2020.1848606

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