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    Does bonding really bond? Liability of foreignness and cross-listing of Chinese firms on international stock exchanges

    252169.pdf (353.4Kb)
    Access Status
    Open access
    Authors
    Liu, L.
    Jiang, Fuming
    Sathye, M.
    Date
    2017
    Type
    Journal Article
    
    Metadata
    Show full item record
    Citation
    Liu, L. and Jiang, F. and Sathye, M. 2017. Does bonding really bond? Liability of foreignness and cross-listing of Chinese firms on international stock exchanges. Research in International Business and Finance. 41: pp. 109-124.
    Source Title
    Research in International Business and Finance
    DOI
    10.1016/j.ribaf.2017.04.033
    ISSN
    0275-5319
    School
    School of Management
    URI
    http://hdl.handle.net/20.500.11937/53276
    Collection
    • Curtin Research Publications
    Abstract

    This study examines the relationship between cross-listing and firm valuation in the context of Chinese firms cross-listed on major international exchanges, such as the NASDAQ, New York Stock Exchange (NYSE), Hong Kong Main Board, Hong Kong Growth Enterprise Market (GEM), Singapore Stock Exchange, and London Alternative Investment Market (LAIM). Through the lenses of bonding theory and liability of foreignness-based multinational enterprise theories, two sets of alternative hypotheses are developed and tested using panel data over a period of twelve years during 2001–2012. Contrary to the bonding theory, the results reveal that the firms listed in Mainland China recorded better valuation than the firms cross-listed on the international stock exchanges. The more sophisticated corporate governance mechanisms applied in international stock exchanges do not always entail better firm valuation. Institutional distance, cultural distance and the distance in economic freedom between China and the cross-listing location countries interact with governance variables negatively affecting performance of cross-listed firms. The direct negative impact of the three distance variables on the firm valuation is also statistically significant. The outcome of Chinese firms’ cross-listing behaviours appears to contradict the general bonding theory.

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