Impact Of Cross-listings On Externally Financing Growth

The returning of Qingdao beer co., LTD to A-share market in China in1993after listed in Hong Kong had started a trend of cross-listing in China. Since economy in Hong Kong links closely with China, and the geographical position of it is close to the mainland, and it has similar cultural tradition with the mainland, what’s more, the application of listing in Hong Kong’s securities market is much more likely to be permitted by supervisor in China than other markets in the world, most of the Chinese cross-listing companies chose to list in China and Hong Kong, in addition, there are also some companies choose to cross-list in the United States, Singapore and the UK. In2001, the China securities regulatory commission and the ministry of foreign trade and economic cooperation jointly released a document named several opinions on the listed companies involved in foreign investment, since then the restrictions on cross-listing are relaxed, the large state-owned enterprises like PetroChina, Sinopec etc. have returned to our A share market, the cross listed companies in china have become more and more. Statistics about listed Chinese companies from CSMAR shows that, there are87companies listed in Shanghai or Shenzhen stock exchange and stock exchanges from regions outside China mainland by December2012, these regions are Hong Kong, the United States, Britain and Singapore.Due to the differences in development degree of the securities markets, scholars in the western academia have paid earlier attention on the cross listing activities of companies than scholars in China, especially relative researches in American have studied very deeply in this field, and have got rich research achievements as well as a relatively mature system of research methods. The researches in the western academia can be classified in to several parts including the long-term performance of cross listing companies, the motivation of cross listing, the capital market’s reaction to cross-listing behavior. Both in the theoretical derivation and empirical research results the western mainstream have the outcomes that the cross listing behavior can help enterprises to grow, improve the corporate governance, enhance the cognitive of investors, ease the market segmentation state, improve the market liquidity and relax the constraint on financing. Using the mature research framework and research methods from western scholars, Chinese scholars focus to studied the cross listing activities in China after2007. The results, which are consistent with that of overseas mainstream research conclusion, show that the cross-listing behavior of the Chinese companies can ease market segmentation, enhance investor cognition, improve corporate governance and bring capital effects for the enterprises. Even though the capital effects of cross-listings has been deeply studied by scholars at home and abroad, the experience study of the relationship between cross listing and companies’ growth by externally financing is still a new field for us to explore, so the study in this paper will rich Chinese cross-listing research results, and it has the meaning of filling the blank in domestic study.This article mainly studies the effect the cross listing activities have on the growth by externally financing, under the background of global capital flow liberalization trend.In consideration of the particularity of Chinese cross-listing companies’ data, I can not find full reasonable matching companies for many leading enterprises in China if I use the study method of comparing; but the numbers of cross listing companies would be very little for our study if I use the data of cross listed companies only. So in this paper, I use the paired samples and the simple cross listing companies sample at the same time, expecting that the results of the two method can support each other, complement each other. So in this paper, there are two kinds of sample data, the sample1corresponding model1and model2, and the sample2corresponding model3and model4. In sample1I have both cross listing companies and non-cross-listing companies, and they are similar in some kinds of financial data.In sample2I have only cross listing companies. I will introduce three dummy variables representing listing on two markets, three markets and four markets into our models to analyze if the affect the cross listing have on the company growth by externally financing is different when the numbers of listing markets are different.In this paper I will adopt the research method of both empirical study and normative analysis, just as show in follows: The first part:introduction. This part mainly elaborates the research background and meanings, research ideas and methods, main contents and frameworks, main contributions and shortcomings of this article.The second part:literature review.In the literature review part, I make a detailed review and summary of the domestic and foreign scholars’ research on the impact of cross-listing enterprise behaviors from four angles:the motivation and the reason of cross-listings, the influence of cross-listings on investment and financing, the influence of cross-listing on corporate value and the research comment.The third part:the definition, institutional background and theoretical analysis.This dissertation illustrates the meaning and types of cross-listing, the institutional backgrounds of Chinese companies cross-listing in New York, Hong Kong, London and Singapore, the basic theory of corporate finance and the meanings of corporate growth.Among them:this dissertation expounds the motivation and the reason of cross-listing activities using financing and international operation strategy. Both two of them belongs to mainstream opinions in foreign academic world.About the mature theory of how to improve the enterprise’s abilities of financing, this article makes a comprehensive analysis on cross listed companies from four aspects:market segmentation hypothesis, liquidity hypothesis, investor recognition hypothesis and bounding hypothesis.About firm growth, first of all, this part expounds the definition of firm growth. Secondly, divides the firm growth into endogenous financing growth and externally financing growth. Thirdly analyzes the three decisive factors into "financing constraints","government regulation" and "legal protection" on firm growth and then discusses their influences on externally financing on a specific and micro level. Finally, based on the Dermiguc-Kunt and Maksimovic’s (1998) model, I successively deduces the value of SFG, SG, company actual growth rate G, EXCESS_SFG, EXCESS_SG and the relationship between the five of them. The fourth part:the research design.Based on market segmentation hypothesis and liquidity hypothesis, the research hypothesis of this dissertation will be provided according to the literature support and theoretical analysis. The data collection, sample selection standards and sample processing of this dissertation will be introduced according to the research hypothesis.This dissertation establishes a new model based on Inder Khunrana’s(2008) research of cross-listings and externally financing growth model.1use the number of listing markets as control variables instead of the payout ratio and net fixed assets market value, in order to analyze the influence of the numbers of cross-listing places on externally financing growth. And also the dependent variables, the test variables and the control variables will be defined in the model.The fifth part:the empirical result analysis.At first, this dissertation adopts the methods of descriptive statistics, comparison, variable related analysis and the random effects model, fixed effects models and mixed OLS model of the multiple regression analysis and other methods to test the research hypothesis. Then the Breusch-Pagan test, Wald test will be adopted to enhance the robustness and reliability of the regression results. All of them are used to prove the reliability of the conclusion in this paper.The sixth part:research conclusions and policy recommendations.According to the result of empirical test, the conclusions are summarized as follows:(1) The behavior of cross-listings will positively affects the whole externally financing growth and externally financing growth gain by stock equity financing.(2) The impact of cross-listing behavior on externally financing growth only gain by stock equity is greater than the whole externally financing growth.(3) The reason of the Chinese enterprises listed abroad returning back is that the formation of cross-listing can ameliorate the financing constraints and reduce the cost of financing. So they can get more money to realize the rapid growth of externally financing.In this dissertation, based on the conclusion of theoretical analysis and empirical test, such policy suggestions can be put forward as follows:(1) The cross-listing enterprises are the bridge to transmit the experience of enterprise management and marketing management from overseas mature markets. The cross-listing enterprises need to be strictly asked due to the obligations. The enterprises which are on the way to cross-listing need to understand that cross-listing is a tool for development but not the tool for "money encirclement".(2) The relevant regulators should encourage the cross-listing activities of small and medium-sized enterprises, because for these companies, the positive effects of cross-listing on externally financing growth are more obviously.(3)With the rapid increasing of cross-listing companies, Chinese regulators should draw lessons from the advanced experience of mature securities markets, improve the information disclosure system of securities market, add more protection legislation, improve the domestic capital market financing environment, in order to match up the reform of China’s financial markets.Main contributions of this dissertation:(1) It has a certain unique perspective.The cross-listing behavior and externally financing growth was investigated in this paper. From this unique perspective, I analyze the cross-listing behavior of Chinese enterprises, and on the basis of the empirical results I have got some policy suggestions for related regulators.(2) It has a certain innovative method.Not only the research samples of cross-listing companies, but also the research samples of select paired cross-listed companies is used in the study.Not only the descriptive statistics, correlation analysis and other basic econometric analysis, but also the canonical analysis on the unbalanced panel data have been done in this paper, in order to get accurate and right outcomes in the research.