A study into the non-domestic financial market’s perception of overseas-listed firms : mainland Chinese firms listed on Hong Kong stock exchange

  • Zihan Xu

    Student thesis: Doctoral Thesis


    This thesis examines the Hong Kong market’s perception of being a politically connected firm in China. The recent phenomenon of globalisation has seen a continuous trend of Chinese enterprises listing in overseas markets, especially for state-owned enterprises that play a dominant role in Chinese market. There are no prior studies examining the non-domestic market’s perception of Chinese cross-listed firms. Do these Chinese cross-listed firms enjoy a premium or a discount in a non-domestic market?
    This study therefore fills a research gap and makes a contribution from a different perspective. It examines the Hong Kong market’s perception of Chinese cross-listed firms by comparing Chinese HK-listed firms and HK-listed firms at the aggregate level. In addition, this study extends the literature and examines the role of political connections in overseas-listing and examines whether political connections leads to a discount or premium in the overseas market. In this study, the model is set up to examine the valuation differences between Chinese HK-listed SOEs, Chinese HK-listed non-SOEs, and HK-local firms. This study examines three variables which have been identified as having an impact on capital markets’ perceptions of cross-listed firms. These variables are related to home bias, the ownership structure of firms and political connections.
    This study found that Chinese cases were particular and different from western stories. It is found that Chinese cross-listed firms traded at a premium to host market firms in the Hong Kong market. In relation to home bias literature, this study found this theory does not have much of an impact in the context of Chinese overseas-listing. In relation to ownership concentration, this study found that the concentrated ownership structure in the Chinese context contributed to the valuation premium of Chinese HK-listed firms. In relation to political connections, this study suggested that capital markets viewed politically connected firms favourably. This should give the strongest indication of the market’s perception of being politically connected in Chinese context. The study also found that there was not much difference between Chinese non-SOEs and a matched local Hong Kong firm in the same market. It indicated that what has found from western studies is not necessarily true for Chinese cases.
    Unlike previous literature on political connections, which is mostly based on domestic markets, this study discusses the role of political connections on firm valuations from the perspective of the non-domestic market. This study not only assists Chinese companies to better understand the non-domestic financial environment but also helps Chinese firms to become competent market participants. Additionally, it may be applicable to firms from emerging markets in terms of understanding overseas-listing.
    Date of Award2018
    Original languageEnglish
    SupervisorCraig Applegate (Supervisor), Milind Sathye (Supervisor), Mark Hughes (Supervisor), Lixian Liu (Supervisor) & Geoff Nicoll (Supervisor)

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