Cross listing and firm value : corporate governance or market segmentation? : an empirical study of the stock market

Abstract

This study investigates the economic consequences of cross-listing on the Chinese stock market.We argue that by adopting a higher disclosure standard through cross- listing firms voluntarily commit themselves to reducing information asymmetry.As a result, cross-listed firms are able to benefit from growth opportunities with less appropriated cash flow and lower cost of capital. The empirical evidence shows that cross-listed firms indeed command higher valuations than their non-cross-listed counterparts, after controlling for certain firm-specific attributes.This lends support to the corporate governance hypothesis of cross-listing on the Chinese stock market.The study also argues that an overall upgrading of accounting standards cannot substitute for the cross-listing mechanism. Keywords: corporate governance, listing, China