A Study On Cross-listing Issues

Since the middle of 2005, the bull A stock market is regaining its financing capability, and the companies which have gone aboard IPO are eager to raise fund from A stock market, while some others are still seeking offshore IPO opportunities. There have risen several issues, such as the arguments on A+H, on the refunding of Red-chips, the pricing power of A shares and Hongkong Market, and the argument on cross listing. Thus the study is on such a background.This paper first introduces the concept of cross listing, and has a basic understanding of the development of H share and Red Chips. The paper focuses on the co-integration analysis of Shanghai Comprehensive Index, Hengseng Index, China stock Index, the index of the index. The study finds out the co-integration relation between H-shares, Red chips and A-shares is increasing, and the co-movement of mainland China and Hongkong Market is strengthening.Another key point of the study is the reaction of Hongkong investors to H-shares companies returning to A-share market. Through event analysis approach, the paper finds that the price effect exists and the volatility effect is moderate, one possible result is the reduction of equity capital cost.Base on the study, the paper gives some suggestions on the development of mainland and Hongkong stock market, and some key points on the decision making process of companies.Finally, the problems requiring further studies are discussed.