Study On The Cross-listing And Executive Turnover Based On Bonding Hypothesis

Cross listing is one of the important phenomenons in the trend of world economic integration. With the further development of capital globalization, cross-listing has become one of the hot issues in academic research. The late 1990 s, researchers turned to the cross-listing and cross-listed corporate governance. Coffee and Stulz(1999) proposed “Bonding Hypothesis”. Bonding Hypothesis points out that one of the main motivations for companies listed overseas is that,the companies wanted to bond themselves and the listing rules of the business and legal areas together to make corporate governance improved. To date, most empirical for Bonding Hypothesis is about the economic consequences. But these empirical evidence can not be directly attributed to the Bonding Hypothesis, because the other hypotheses of cross-listing have similar economic forecasts.Firstly, in terms of capital markets and corporate governance requirements, this paper compares the difference between Hong Kong and the mainland capital market about capital market institutional level. Then, this paper examines one way to measure an important indicator of corporate governance : executive turnover, the ability to identify and terminate poorly performing CEOs, to test the effectiveness of H.K. investor protections in improving the corporate governance of cross-listed firms. Finally, this paper also uses the market model of the event study method, changes in the market reaction executives to study and explore the impact of cross-listing on executive changes market reactions.In this paper, the empirical analysis show that: 1) The probability of executive turnover is negatively correlated with company performance; 2) Compared with the A-share companies, the negative correlation between the probability of executive turnover and the company performance is more significant; 3) Compared with the A-share companies, the negative correlation between the probability of enforced executive turnover and the company performance is more significant; 4) The investors’ market reaction of executive turnover was positive; 5) Compared with A + H share company, the investors’ market reaction of executive turnover of A-share company is more positive.This study found that the Bonding Hypothesis of the cross-listing is valid, cross-listing does improve the corporate governance of listed companies; However, compared with the cross-listed companies, investors are more comfortable with a non-cross-listed company executives change events...