Author: by Dong-Soon Kim, Eunjung Yeo and Li Zhang
Summary:
This study examines whether an influence from a difference in corporate governance structure exists on firms†agency costs between Chinese companies cross-listed on the Hong Kong Stock Exchange (HKSE) and those that are domestically listed ones. We determine that, overall, companies with an HKSE cross-listing had better corporate governance than those without. The corporate governance advantage of the HKSE cross-listed firms holds if we control for firm fixed effects and resolve the potential endogeneity problem between corporate governance and agency costs by using two-stage least square (2SLS) regression analysis with instrumental variables. Specifically, the HKSE cross-listed firms had better corporate governance in terms of board size and institutional ownership. By contrast, domestically listed firms experienced the adverse effects of institutional ownerâ€s roles and higher board pay. The advantages of HKSE cross-listed firms may stem from the benefits of having a larger board size and the effective monitoring of the management by the institutional stockholders. Implications are drawn for the debate on cross-listing and the future challenges of Chinese firms, and a more robust monitoring is necessary for sustainable finance of their stock markets. View Full-Text
