A widely accepted theory is challenged in this paper. Foreign firms’ pricing premium from listing in the US was considered as a result of better regulation and protection of minority shareholders of the listed companies. This paper raises another viewpoint that the regulation clauses may not have been implemented as well as people used to think. The information asymmetry between the US regulators and the overseas firms creates the possibility that illegal activities such as forging documents and faking financial reports may not be discovered in time, especially when listing is through a non-IPO way like reverse merger transactions. As a result, the de facto poorly performed foreign companies also have a chance to list in the US exchanges by exaggerating their business performance in balance sheets and profit from selling stocks to American investors in the secondary market as long as their improper behaviors are not perceived by the regulators before listing. Therefore in contrast to what the existing literature has assumed, there are two types of foreign firms traded on the NYSE, Nasdaq and Amex: good firms with growth opportunities and bad firms which cheat the investors. As investors realize the existence of the bad firms, the problem becomes similar to the market of lemons. Price of the foreign stocks from countries with more information asymmetry, poorer legal enforcement and corporate governance could go down and the cross-listing premium may disappear. This paper uses firm-level accounting data of the Chinese stocks listed in the US exchanges and listed in the four stock markets in mainland China to prove the above hypothesis. Cross-listing discount, instead of premium, is found. Tobin’s q premium from listing in the US has been decreasing from year 2006 when the Chinese firms’ accounting fraud was first reported and finally turned to be negative. The widely reported financial fraud of the US-listed Chinese firms after 2010 proves the correctness of the aforementioned two-type-firm theory. Accordingly, the US-listed Chinese firms with more information disclosure are higher valuated, including firms listed via IPO rather than reverse merger, firms from large Chinese cities with better legal enforcement and easier verification of information authenticity, and large firms which are covered by more analysts and media. As for the hypothesis that bad companies prefer exaggerating their performance in financial reports, the historical data does show that the already delisted companies reported a much higher 12-month trailing EPS before their delisting. Moreover, when there is less information asymmetry and more information disclosure, price of the US-listed Chinese stocks goes up.