Research On The Financial Constraints Of Overseas Listing And Return Of China Concept Stocks

With the steady development of Chinese economy and the rise of emerging industries,many domestic enterprises are experiencing huge funding gap.When endogenous financing cannot be met,a group of domestic companies go overseas for listing.Such companies are known as “China Concept Stocks”.The road of overseas listing has been divided into four stages.The first stage dates back to the 1990 s,the state-owned enterprises benefited from the opening-up policy and became the pioneer to explore overseas listing.The second stage appeared in the early 21 st century,the rapid development of Internet made Internet companies compete to go public in the United States.The third stage is the coexistence of private enterprises listing and short-selling.The last is an integration of Internet financial companies' overseas listing and other enterprises' privatization.In the later stage of overseas listing,due to the differences in the market system and investment philosophy between China and US,the valuation gap becomes larger.Meanwhile,the introduction of domestic policies lays a legal and institutional foundation and raises the enthusiasm of China concept stocks to return to China.Focus Media,as the first media company returning to China,its market options are highly matched with the market trends,as well as its financial constraints.The entire process of Focus Media lasts for a long time,which is conducive to long-term continuous analysis and comparisons among financial constraints at different stages,so as to deeply understand the choices among different capital markets.Based on the market timing theory,we divide the development of China concept stocks into three stages: overseas listing,privatization and returning.The distribution characteristics,motivations,paths and risks of each stage are presented according to systems theory,undervaluation theory,efficiency theory,signaling theory and investor recognition hypothesis.Relying on asymmetric information theory,pecking order theory,principal-agent theory and free cash flow hypothesis,we analyze the qualitative and quantitative financial constraints of samples in each stage to figure out the impact of market selections on financial constraints.Up to March 2019,this paper has collected 10 cases that have completed the privatization from US and return to China from the WIND database.Through the statistical analysis of the samples and the case study of Focus Media,the following conclusions are drawn: market-selecting decisions under different stages can alleviate enterprises' financial constraints.The intensification of financial constraints is significant to cause different market-selecting decisions in different periods.Under different stages,the mitigation effects of market-selecting decisions on financial constraints are time-lagged.The market-selecting decision only has a short-term mitigation to financial constraints.The market-selecting decisions have different mitigations on financial constraints of China concept stocks.In terms of main contribution,this paper explores the financial constraint problem of Chinese concept stocks under the coexistence of multiple capital markets,and simultaneously analyzes Chinese concept stocks in the whole process of overseas listing,privatization and returning.Qualitative and quantitative comparative analysis of financial constraints enriches existing academic research.Analyzing the characteristics of time,location,path,industry and market value at each stage,figuring out the motivations and risks for making market choices are both conducive to explore the commonality of China concept stocks and understand the overall financial constraints.Different from previous scholars' studies of single stage or financial performance,this paper analyzes Focus Media at the aspect of financial constraints among the whole process,which has theoretical value.Due to the privatization and return are related to domestic and overseas markets,the long time span and a large number of stakeholders lead to limited information in the database.In addition,the choice of delisting from US and return to China is just rising,and many China concept stocks have embarked on or are still measuring the road of returning to China,there are only 10 successful cases available for research up to now.The research sample limitation may cause deviation to our conclusion,and the perfection of this topic will be done with more practices in the future.