Direct overseas listing versus cross-listing: A multivalued treatment effects analysis of Chinese listed firms

Abstract

Firms of emerging economies are increasingly seeking various forms of overseas listing as alternatives to the widely studied cross-listing to fund their growth. We examine the motivations and consequences of these alternative forms of overseas listing within the potential-outcome framework using Chinese data. In the setting of multiple treatment groups, high-tech firms are found most likely to seek direct overseas listing. Firms with high pre-IPO state ownership concentrations tend to directly list in Hong Kong rather than in the U.S., rejecting legal bonding as a motive of overseas listing. Although an equity issuance explanation implied by the market segmentation hypothesis is more plausible for the listing decisions, we do not obtain any evidence to support its prediction of a lower cost of capital for firms that have access to the overseas finance. The positive longer-term average treatment effects found in this study suggest that the potential expected returns would have been higher, if all firms were to list overseas rather than domestically.