Cross-listing, managerial compensation and corporate governance

Abstract

This study examines the relationship between cross-listing and managerial compensation of Chinese firms that concurrently issued A- and B-shares or A- and H-shares during 2001–2010. The results show that executive compensation is a positive factor to motivate Chinese A-share firms to cross-list as B- or H-shares; it implies that cross-listings could be employed as a way of asset appropriation at the managers’ discretion. The results also confirm that corporate governance is important in determining cross-listings. Under the weak corporate governance institution, Chinese firms were chosen to cross-list based on political considerations rather than on economic merits, serving as a vehicle to signal the quality of state owned enterprises. The results are drawn on agency theory, signalling hypothesis and bonding hypothesis.