scholarly journals Cross-listing and corporate governance: Bonding or avoiding?

2004 ◽  
Vol 1 (4) ◽  
pp. 36-48 ◽  
Author(s):  
Amir N. Licht

In their seminal survey of corporate governance, Shleifer and Vishny distill the issue into a blunt question: "How do [the suppliers of finance] make sure that managers do not steal the capital they supply or invest it in bad projects?" The Enron/Arthur Andersen debacle and the ensuing wave’s of scandal vividly proved that American investors may face this question in the most acute form. To the extent that corporate governance issues play a role in the cross-listing decision, it is a negative role. Generally speaking, the foreign issuer regime "cuts corners" exactly on the issues of corporate governance relating to corporate insiders. The notion that issuers may want to improve their corporate governance by subjecting themselves to a better regulatory regime through cross-listing—say, on an American market—is appealingly elegant. If an American firm could use an NYSE listing to bond its insiders to better governance standards, why couldn’t foreign firms do the same? In an oft-cited 1999 article, Jack Coffee argues that they do just that: In other cases, however, the cross-listing may not entail corporate governance improvements. The cross-listing literature refers to differences in investor protection in three separate respects. In practice, however, foreign issuers can easily obtain an exemption from corporate governance listing requirements. The notion that corporations can self-improve their corporate governance by opting into a foreign country’s legal and regulatory regime through cross-listing has made considerable inroads into the legal and finance literature.

2010 ◽  
Vol 8 (1) ◽  
pp. 667-678
Author(s):  
Kashif Rashid ◽  
Sardar Islam

This paper seeks to examine the role of blockholders (majority shareholders) in affecting the value of a firm (BVF) in the developing (Malaysian) financial market characterized by the existence of additional imperfections in this market. The data is collected by using stratified random sampling for the firms listed in the Kuala Lumpur Securities Exchange for the years 2000-2003 to perform multiple regression analysis. The results of the study suggest that blockholders play a negative role in affecting the firms’ value explaining market operations in the selected market, and contradicting the foundation of the developing market and convergence of interest hypothesis. In addition, the bigger board, liquid market, correct valuation of securities and effective utilization of assets improve shareholders’ value in the selected financial market. This paper contributes to the literature by performing a comprehensive study on the poorly researched topic of the BVF relationship. Furthermore, a correct proxy to value a firm is used and additional tests for robustness are performed to provide valid results on this relationship. Finally, the role of additional imperfections and implications of different management theories in explaining the BVF relationship is also provided in this study. The results provide new insights and highlight the importance of corporate governance provisions relevant for the firms of the developing market. The results of the study can be used by the regulatory regime to make effective corporate governance policies.


Author(s):  
Martin Kim ◽  
Steve Lin ◽  
Liu L Yang

This study examines whether improved information environment in the OTCQX International market (hereafter QX market) benefits blue-chip foreign private issuers (FPIs). We find that around 600 FPIs traded their stocks in the QX market during 2007-2016, and they are financially better than their home-country counterparts. We also find approximately 6% abnormal return around the cross-listing days. Moreover, FPIs with higher financial reporting transparency (i.e., lower earnings smoothness and preparing financial statements in accordance with International Financial Reporting Standards) experience more pronounced abnormal returns and liquidity improvement around the cross-listing days. Further analysis shows that market premium of cross listing on the QX market is not attributed to the bonding effect. Our results highlight the importance of information environment of a less regulated OTC market in benefiting large and established FPIs, which should be of interest to market regulators, investors, and foreign firms that intend to access less regulated U.S. markets.


Author(s):  
Lee-Hsien Pan ◽  
Shuo Chen ◽  
Chieh-Chung Wu ◽  
K. C. Chen

This paper examines the effects of cross listing and Sarbanes-Oxley Act (SOX) on corporate governance and firm performance of the cross-listed firms from four Tiger Cub Economics: Indonesia, Malaysia, Philippines, and Thailand. We find that these non-U.S. firms that list their shares as American Depositary Receipts (ADRs) experience an improvement in corporate governance and a decrease in firm performance after issuing ADRs in the U.S. However, SOX appears to be effective in enhancing firm performance for these ADRs, though it has little impact on improving corporate governance.


2017 ◽  
Vol 35 (5) ◽  
pp. 509-527
Author(s):  
Kim Hin David Ho ◽  
Kwame Addae-Dapaah ◽  
Fang Rui Lina Peck

Purpose The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs). Design/methodology/approach The paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences. Findings Cross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample. Research limitations/implications Results are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta. Practical implications The results and findings should incentivise REIT managers to explore viable cross-listing. Social implications Such cross-listing for REITs should enhance risk diversification. Originality/value This is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion.


2009 ◽  
Vol 84 (5) ◽  
pp. 1429-1463 ◽  
Author(s):  
Jong-Hag Choi ◽  
Jeong-Bon Kim ◽  
Xiaohong Liu ◽  
Dan A. Simunic

ABSTRACT: We study the effects of cross-listings on audit fees. We first develop a model in which legal environments play a crucial role in determining the auditor's legal liability. Our model and analysis predict that auditors charge higher fees for firms that are cross-listed in countries with stronger legal regimes than they do for non-cross-listed firms and that the cross-listing audit fee premium increases with the difference in the strength of legal regimes between the cross-listed foreign country and the home country. We then empirically test these predictions. The results of our cross-country regressions strongly support our predictions. In addition, we find no significant cross-listing fee premium for firms that are cross-listed in countries whose legal regimes are. no stronger than those of their home countries. This suggests that cross-listing audit fee premiums are associated with increased legal liability and not with increased audit complexity per se. Our findings help explain why cross-listing premiums occur and what determines their magnitude.


2018 ◽  
Vol 67 (8) ◽  
pp. 1310-1333 ◽  
Author(s):  
Neha Saini ◽  
Monica Singhania

PurposeThe purpose of this paper is to examine relationship between corporate governance (CG) and firm performance for a set of 255 foreign-funded firms in the form of foreign direct investment (FDI) and private equity (PE). The authors employ a wide range of CG measures including board size, meetings, board gender and foreign ownership which are used as the proxy of globalisation and control variables like firm age, leverage, firm size and capital expenditure to arrive at a conclusion.Design/methodology/approachPanel data set of 255 (187 companies funded by foreign capital in the form of FDI, and 68 companies having foreign capital in the form PE) companies listed on Bombay Stock Exchange, for the period of eight years (2008–2015) are analysed by using static (fixed and random effects) and dynamic (generalised method of moments (GMM)) panel data specifications to examine the relationship among CG, globalisation and firm performance.FindingsThe empirical results of static model indicate the relationship between CG and performance of foreign firms, which are not very strong in India. This is due to the fact that most of the firms are not following the guidelines and regulations strictly in the initial period of sample years. Diversity in board is found as an important variable in accessing firm performance. And the authors also found that foreign firms are very particular about the implementation of CG norms. The results of GMM model highlight the interaction term of foreign ownership with governance indicators. CG is having a positive and significant impact over performance, inferring that higher foreign ownership (in the form of FDI and PE) in firm leading to positive effect on profitability.Practical implicationsThe investor’s preference of financing a unit is guided by the performance of a firm. Investors are more inclined towards high-performing firms, and hence higher profitability leads to higher inflow of capital. The result indicates that higher accounting and market performance may be achieved by good governance practices, in turn, leading to reduced agency costs. Countries with high governance scores attract more of foreign capital. Similar to the best governed countries, the companies having good governance practices attract more foreign inflows in the form of capital.Originality/valueWhile previous literature considered a single measurement framework in the form of a CG index, the authors tried to incorporate a range of CG indicators to study the effect of globalisation and CG on firm performance. The authors segregated foreign-owned funds into two parts, especially FDI and PE. This paper examined heterogeneity in the form of FDI-funded and PE-funded firms, as no prior literature is available which has evaluated different sets of foreign funds simultaneously on CG.


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