Cross-listing and Corporate Malfeasance: Evidence from P-chip Firms

Filip, A., Huang, Z. & Lui, D. (2018). Cross-listing and Corporate Malfeasance: Evidence from P-chip Firms. Journal of Corporate Finance, doi: 10.1016/j.jcorpfin.2017.07.003

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The rapid growth of the private sector in China in recent decades has created a large number of capital-hungry private sector firms. An increasing number of these firms choose to raise equity capital on international exchanges, which typically have stronger disclosure, corporate governance, and investor protection regulations. In light of international investors’ and regulators’ concerns about the corporate finance practice of China’s private sector firms, particularly regarding the integrity of their reported earnings, we investigate whether these firms aggressively manipulate their accounts by examining those listed in Hong Kong, commonly known as P-chips. We find systematic evidence that P-chips engage in more earnings management and other corporate misbehaviors than their counterparts in Hong Kong. We posit and provide evidence consistent with cross-jurisdictional enforcement difficulty as a possible explanation to P-chips’ questionable practice, and discuss its implications.

Item Type: Article
Additional Information: © 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Uncontrolled Keywords: China’s private sector; P-chips; Enforcement difficulty; Corporate malfeasance
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance

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