Cross-listing, managerial compensation and corporate governance

What is it about?

This study examines the relationship between cross-listing and managerial compensation of Chinese firms . The results show that executive compensation is a positive factor to motivate Chinese firms to cross-list; it implies that cross-listings could be employed as a way of asset appropriation at the managers’ discretion. Corporate governance is important in in determining cross-listings. Chinese firms were chosen to cross-list based on political considerations rather than on economic merits.

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Why is it important?

Why do firms cross-list their shares on foreign exchanges? The literature elicits that cross-listing occurs due to agency cost, market signalling and legal bonding. However, the determinants of Chinese firms to cross-list are quite different from their counterparts in the US and Europe because the Chinese firms traditionally have separate, restricted classes of shares for domestic residents and foreigners, and China is the only country in which the government controls the size of stock market.