Government Expropriation and Foreign Listings of Emerging Economy Firms

Abstract

This study develops an institutional arbitrage perspective regarding the strategic drivers behind the foreign listings of emerging economy firms (EEFs). Drawing on an institution-based view of strategy and an agency perspective of government, we argue that if a firm has higher exposure to government expropriation, as reflected in the firm’s level of private/foreign ownership, it will more likely to pursue a foreign listing in developed markets to gain additional investment protection. Using a sample of listed firms from China, we found incremental explanatory power of private/foreign ownership over finance-based perspectives in predicting foreign listing. These effects were lessened if the firm had a politically-connected CEO, and strengthened if the level of subnational government intervention was higher.