The Effect Of Accounting Standards Equivalence, Cross-Listing On Firms’ Value

With the development of economic globalization, the relationship of the capital markets is becoming more and more closely. Accounting standards, as a business language, whose coordination, convergence and equivalence between countries or regions are also becoming more and more important. Conform to this trend of development, China mainland and Hong Kong signed a joint statement about the equivalence of bilateral accounting standards on December6,2012, under the background that the accounting standards of China mainland and Hong Kong have reached a high degree of convergence. Theoretically, high-quality accounting standards generally will produce high-quality economic consequences. And, as we all know that the national or regional level of institutional environment has an important impact on the implementation of accounting standards. So, on the basis of the effect of cross-listing, we attempt to examine the effect on firms’value of equivalence between China mainland and Hong Kong. At the same time, this paper explains the result from the point view of institutional environment.On the basis of the following theories, the theory of constraints, the economic consequences of the theory of accounting standards, transaction cost theory, institutional change theory and the theory of law and finance, we study the effect on firms’value of cross-listing and firms’value of equivalence between China mainland and Hong Kong, choosing the A-share firms and AH-shares firms from2002-2011as the test samples. And we analyze its effect from the point view of the investor protection and law enforcement between China mainland and Hong Kong. The conclusions show that Tobin-Q increases by cross-listing, and the value difference of two types of companies is not significantly reduced. Furthermore, based on the law and finance perspective, we find that the reason why the difference is not decreased is that the environment of Hong Kong is better than China mainland. And the environment mainly refers investor protection and law enforcement. At last, based on the results, we propose to some suggestions. Such as improving the level of investor protection, strengthening the level of external supervision and execution efficiency and improving the company’s internal governance.