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Does the bonding effect matter in a more integrated capital market world?

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  • Doukas, John A.
  • Wang, Liu

Abstract

This paper examines the bonding effect of cross-listing before and after the stock market liberalization reforms in China. Consistent with the bonding hypothesis, we find that Chinese firms with foreign listings attain higher valuations than firms without foreign listings. We also find that they manage earnings less than comparable purely domestic-listed firms and have more informative stock prices. Further investigation indicates that the divergence in earnings quality between cross-listed and non–cross-listed firms shrinks dramatically after the Chinese stock market liberalization reforms in 2001 and 2002. Overall, the results suggest that the bonding effect is mitigated in an increasingly integrated capital market world.

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  • Doukas, John A. & Wang, Liu, 2014. "Does the bonding effect matter in a more integrated capital market world?," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 162-184.
    • Handle: RePEc:eee:jimfin:v:47:y:2014:i:c:p:162-184
    DOI: 10.1016/j.jimonfin.2014.05.022
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    3. You, Leyuan & Payne, Janet D. & Lin, Steve Wen-Jen, 2018. "Do multiple foreign listings create value for firms?," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 134-143.
    4. Dau, Luis Alfonso & Moore, Elizabeth M. & Kostova, Tatiana, 2020. "The impact of market based institutional reforms on firm strategy and performance: Review and extension," Journal of World Business, Elsevier, vol. 55(4).
    5. Elisabeth de Fontenay & Josefin Meyer & Mitu Gulati, 2019. "The sovereign debt listing puzzle," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 472-495.

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