The Role of Regulatory Frameworks in Shaping the Firm Value of Cross-Listed Companies: A Comparative Analysis

Chen Yi; Ahmed Razman Bin Abdul Latiff

doi:10.56982/dream.v3i04.225

Authors

Chen Yi City University Malaysia
Ahmed Razman Bin Abdul Latiff City University Malaysia

DOI:

https://doi.org/10.56982/dream.v3i04.225

Keywords:

regulatory framework, firm value, cross-listed companies, Hongkong, China

Abstract

This study examines the impact of regulatory frameworks on the firm value of cross-listed companies in Hong Kong and Mainland China, employing Institutional and Agency theories as analytical lenses. The research primarily utilizes quantitative methodologies, analysing secondary data sourced from financial databases and regulatory bodies. Key findings indicate that stringent regulatory compliance in Hong Kong correlates with higher firm values compared to Mainland China. Effective enforcement of regulations in Hong Kong also reduces information asymmetry, thereby increasing firm value. Conversely, regulatory discrepancies between the two regions increase perceived investment risks, negatively impacting firm value. These results underscore the importance of robust, consistent regulatory practices in enhancing corporate legitimacy and investor confidence. The study acknowledges limitations related to the reliance on secondary data and the dynamic nature of regulatory frameworks, which may affect the timeliness and applicability of the findings across different regions. Future research directions include conducting longitudinal studies to assess the temporal effects of regulatory changes, incorporating qualitative analyses to deepen understanding of corporate responses to regulatory environments, and expanding the geographical scope to include comparisons with other global markets. This research contributes to the existing literature by highlighting how regulatory alignment and enforcement influence the economic valuation of cross-listed firms, providing valuable insights for regulators and corporate managers aiming to optimize firm value in complex regulatory landscapes.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

References

Aggarwal, R., Erel, I., Ferreira, M., & Matos, P. (2009). Does governance travel around the world? Evidence from institutional investors. Journal of Financial Economics. DOI: https://doi.org/10.2139/ssrn.1361143

Allen, F., Qian, J., & Qian, M. Y. (2005). Law, finance, and economic growth in China. Journal of Financial Economics. DOI: https://doi.org/10.1016/j.jfineco.2004.06.010

Arner, D. W. (2007). Financial Markets in Hong Kong: Law and Practice. Oxford University Press.

Bryman, A. (2012). Social Research Methods. Oxford University Press.

Chan, S. (2018). Regulatory environment and its impact on foreign investment in China. Asia Pacific Business Review.

Chen, G. M., & Young, M. N. (2010). Cross-border mergers and acquisitions: Their role in industrial globalisation. Antitrust Bulletin.

Chen, L., & Wang, M. (2021). Regulatory impacts on Asian markets: A review of financial governance. Asian Journal of Finance & Accounting.

Cheung, A. (2010). The Role of Hong Kong’s Securities and Futures Commission in Market Oversight. Capital Markets Law Journal.

Coffee, J. C. (2002). Racing towards the top?: The impact of cross-listings and stock market competition on international corporate governance. Columbia Law Review. DOI: https://doi.org/10.2139/ssrn.315840

Creswell, J. W. (2014). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. SAGE Publications.

Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.

Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The law and economics of self-dealing. Journal of Financial Economics. DOI: https://doi.org/10.1016/j.jfineco.2007.02.007

DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review. DOI: https://doi.org/10.2307/2095101

Doidge, C., Karolyi, G. A., & Stulz, R. M. (2004). Why are foreign firms listed in the U.S. worth more?. Journal of Financial Economics. DOI: https://doi.org/10.1016/S0304-405X(03)00183-1

Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance. DOI: https://doi.org/10.2307/2325486

Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics. DOI: https://doi.org/10.2139/ssrn.258514

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics. DOI: https://doi.org/10.1016/0304-405X(76)90026-X

Jiang, F., & Kim, K. A. (2015). Corporate governance in China: Recent developments, key problems, and solutions. Journal of Corporate Finance. DOI: https://doi.org/10.1016/j.jcorpfin.2014.10.010

Karolyi, G. A. (2006). The world of cross-listings and cross-listings of the world: Challenging conventional wisdom. Review of Finance Studies. DOI: https://doi.org/10.1007/s10679-006-6980-8

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (2002). Investor protection and corporate valuation. The Journal of Finance. DOI: https://doi.org/10.1111/1540-6261.00457

Lee, S., & Kim, Y. (2020). Global financial integration and regulatory alignment: Implications for East Asian markets. Journal of Financial Markets.

Liu, X., & Lu, J. (2012). Regulatory focus and the equity financing in China. China Economic Review.

Rappaport, A. (1986). Creating shareholder value: The new standard for business performance. Free Press.

Scott, W. R. (2001). Institutions and Organizations. Sage Publications.

Wang, L. (2018). Regulatory changes and financial structure: The case of China. China Economic Review.

Xu, L., & Yano, G. (2017). The effect of regulatory harmonization on cross-border labor migration: Evidence from the accounting profession. Journal of Accounting and Public Policy.

Zhang, L., & King, M. R. (2017). Shanghai and Hong Kong Stock Connect: An Overview of the Cross-Market Investment Channel. Securities Market Journal.

Zhao, S. (2022). Regulatory reforms and cross-listed firm performance: Evidence from Chinese companies. Journal of International Business Policy.

Zhou, X., & Wang, M. (2019). The impact of regulatory changes on the capital flows of global banking: Evidence from China. China Finance Review International.