The Regulation of Mainland Chinese Companies Listing in Hong Kong -- An Examination of the Enforcement Problems and Strategies

Previous studies about Chinese listings in Hong Kong tend to concentrate on investigating whether Hong Kong's more advanced legal and regulatory system have resulted in the improvement of these companies' financial and/or governance performance. This dissertation, in contrast, asks the question whether the increasingly strong presence of Chinese issuers in Hong Kong's stock market has made any impact, in return, on the local regulatory system. The question is probed by placing a particular emphasis on the enforcement aspect relating to the regulation of "Mainland Chinese companies" -- a term used by Hong Kong regulators to refer to a group of companies based in Mainland China while maintaining listing status in Hong Kong. In addition to charting the actual application of the relevant law and rules, the problems hindering effective enforcement and the strategies employed to tackle them by Hong Kong regulators are also discussed.;To illustrate how the law operates in action, this dissertation adopts an empiricaloriented approach, which uses both quantitative and qualitative research methods to analyse enforcement actions against Mainland Chinese companies. The empirical evidence gathered reveals that civil actions by shareholders are virtually nonii existent whereas ex post sanctions imposed by regulatory agencies experienced a short-lived surge in the mid-2000s. Further, the conduct of private and public enforcement similarly encounters tremendous difficulties in a cross-border context owing to the "One Country, Two Systems" constitutional arrangement. The findings so far appear to point to ineffective regulation and minimal changes that Mainland Chinese companies have exerted on the enforcement pattern. However, instead of accepting such conclusions, this dissertation goes beyond the narrow conception of enforcement as consisting of merely ex post sanctions and looks at the whole approach devised by Hong Kong regulators in response to the challenge of crossborder enforcement. What emerged is a dynamic picture in which a variety of enforcement tools are combined to achieve the regulatory objectives. To mitigate the constraints in applying ex post enforcement actions and direct deterrence, Hong Kong regulators resort extensively to compliance-promoting measures such as education and guidance, ex ante controls such as enhanced shareholder governance rights and vigorous pre-listing scrutiny, and gatekeeper supervision such as the conscription of sponsors to patrol corporate disclosure, to try to secure compliance in Mainland Chinese companies. Viewed in this way, the impact of Chinese listings on the regulation of Hong Kong's stock market is revealed not so much in the number of enforcement actions but the manner in which they are employed.;Since Hong Kong is now working actively to attract listings outside Hong Kong and Mainland China, it can be foreseen that cross-border enforcement will continue to be a great challenge to Hong Kong regulators. They will no doubt, as this dissertation concludes, draw upon their experience in regulating Mainland Chinese companies when dealing with enforcement problems arising in the future.