Three Essays in Corporate Finance: The Case of Chinese Firms and Foreign Listing

Abstract

The thesis contains three empirical studies that investigate the effect of a Hong Kong listing on Chinese firms. The first study (Chapter 3) investigates whether a Hong Kong listing improves Chinese firms’ investment efficiency. Using a large sample of Chinese listed firms from 2001 to 2015, the study finds that investments by Hong Kong-listed Chinese firms have a higher sensitivity to investment opportunities (Tobin’s Q) compared with their domestically listed peers. Also, Hong Kong-listed Chinese firms are not associated with underinvestment. Overall, the findings suggest that a Hong Kong listing improves Chinese firms’ investment efficiency. The second study (Chapter 4) uses a sample of attempted and completed acquisitions to examine whether a Hong Kong listing affects Chinese firms’ acquisition behaviour. Using the propensity score matching method, Hong Kong-listed Chinese firms are matched with domestically listed Chinese firms over the period 2001 to 2015. The study finds that Hong Kong-listed Chinese firms are less likely to be bidders compared with their domestically listed peers. Furthermore, the study finds that Hong Kong-listed Chinese firms are more likely to make completed acquisitions compared to their domestically listed peers. The third study (Chapter 5) investigates the payment method used in over 2,000 completed acquisitions over the period 2001 to 2015 by Hong Kong-listed Chinese firms compared to their domestically listed peers. The study finds that Hong Kong-listed Chinese firms are more likely to use all-cash payments in acquisitions. However, in cross-border deals, all-cash payments are less used by Hong Kong-listed Chinese firms. Also, the study finds that Hong Kong-listed Chinese firms using all-cash payments have a high level of excess cash. Furthermore, these Hong Kong-listed Chinese firms are more likely to experience positive abnormal returns when using all-cash payments.