Date of Award
Doctor of Philosophy (PhD)
John A. Doukas
William Q. Judge
This dissertation examines the role of cross-listing in shaping corporate earnings quality, stock price informativeness, and firm valuation, as well as its impact on a listing firm's home country information asymmetry and stock misvaluation.
The first essay addresses the information asymmetry between Chinese local A-share and foreign B-share markets and its impact on the B-share discount puzzle. In contrast with the widespread belief that domestic investors are better informed than foreign investors, this study indicates that foreign investors actually possess more value-relevant, firm-specific information in an emerging market such as China, where information transparency and investor protection are relatively weak. As such, the observed B-share discount is not compensation for the informational disadvantage of foreign investors but, rather, the result of a downward price correction effect.
The second essay examines the impact of cross-listing on corporate earnings management, price informativeness, and firm value, contingent upon increased market integration. Consistent with the bonding hypothesis, cross-listed firms are found to have better earnings quality, more informative stock prices, and higher valuation than non-cross-listed firms, even though the divergence between the two groups of firms has been less evident since the regulatory reforms of the Chinese stock market liberalization.
The third essay investigates the role of U.S. listing in mitigating a listing firm's home country information asymmetry and stock misvaluation. In contrast with conventional theories that predict enormous cross-listing benefits, this study finds no significant cross-listing premiums. Further investigation indicates that the absence of cross-listing premiums for Chinese firms is mainly a result of a downward price correction (toward the fundamental values of the stocks) once U.S. listing allows for an enhanced capitalization of firm-specific information. In particular, I find that firms with U.S. listings have more informative and less overvalued stock prices than comparable home country firms and that exchange-based U.S. listings result in more informative and more accurately valued stocks than non-exchange-based listings.
The empirical findings of these studies suggest a consistent story: cross-listing on a more regulated market plays an important role in inducing better corporate governance and more transparent information environments, even in today's increasingly integrated world.
"Three Essays on Cross-Listing"
(2010). Doctor of Philosophy (PhD), dissertation, , Old Dominion University, DOI: 10.25777/enbx-sc54