Stock Behavior and Mispricing Puzzle of Chinese Dual-Listed Stocks on U.S. and Hong Kong Stock Exchanges During Listing Periods 公开
Luo, Zhi (Spring 2023)
Abstract
This paper examines 39 Chinese companies that dual-listed on the U.S. stock exchanges and Hong Kong stock exchange between January 1, 2019 and February 21, 2023. The focus of this paper is to study the changes in stock behavior during the dual-listing period as well as the differences between Hong Kong listing prices and U.S. listing prices. China’s economic growth has driven up demand for capital, especially foreign capital. However, major U.S.- listed China-based companies faced delisting risks after President Trump signed the Holding Foreign Companies Accountable Act (HFCAA) into law on December 18, 2020. HFCAA required China-based audit firms to give the Public Company Accounting Oversight Board (PCAOB) complete access to inspect and investigate U.S.-listed China-based companies’ financial statements. Many of these companies decided to dual-list domestically on the Stock Exchange of Hong Kong (SEHK) as a backup plan to continue gaining access to foreign capital. December 15, 2022 was a turning point in the tension between U.S. regulators and Chinese regulators as PCAOB published a statement confirming that it secured complete access to inspect and investigate Chinese firms that have access to U.S. capital markets
A major finding of this paper is that the 39 Chinese stocks experienced a shift of correlation with market indices before and after the enactment of HFCAA and PCAOB’s announcement. When delisting risk was high, these Chinese stocks were more correlated with Hong Kong’s Hang Seng Index and less correlated with U.S.’s S&P 500 and DJIA indices.
This study adopts causal inference and finds that stock and market volatility has a significant impact on the mispricing between Hong Kong listings and U.S. listings. By observing 3 years of price differences from 2019 to 2022, I noticed that the mispricing was the biggest after the HFCAA was signed into law. The delisting risks caused the market to be volatile. However, explaining what is causing the mispricing is still a challenge.
Table of Contents
1 Introduction
1.1 TimelineWithTwoCutoffPoints
1.1.1 First Case of Chinese State-owned Enterprise Delisting
1.1.2 First Cut Off Point: The Beginning of Delisting Risk
1.1.3 Second Case of Chinese State-owned Enterprise Delisting
1.1.4 Second Cut Off Point: The Temporary End of Delisting Risk
1.1.5 Third Case of Chinese State-owned Enterprise Delisting
2 Definitions and Literature Review
2.1 AmericanDepositaryReceipts(ADRs)
2.2 LawofOnePirce
2.3 Liquidity
3 Data Description
3.1 Dual-listedStockData(TreatmentGroup)
3.2 Single-listedStockData(ControlGroup)
3.3 MarketIndicesData
3.4 ExchangeRate
3.5 ADSratio
3.6 RiskFreeRate
4 Methodology
4.1 NoPositiveImpactOnStockPriceAfterDual-listing
4.2 Volatility
4.3 LiquidityAndTradingVolume
4.3.1 Liquidity’sEffectonCostofCapital
4.3.2 Dividends
4.3.3 Liquidity’sEffectofMispricing
4.4 Regressions
4.4.1 RegressionVariables
4.4.2 MarketIndices
4.4.3 ExchangeRate
4.4.4 Volatility
4.5 DifferenceInDifference
4.5.1 RegressionVariables
4.6 Mispricing
4.6.1 MispricingandVolatility
4.6.2 LowR2
4.6.3 CritiqueToLinearRegressionMethod
4.6.4 Non-parametricModels
5 Summary and Conclusions
6 Appendix
About this Honors Thesis
| School | |
|---|---|
| Department | |
| Degree | |
| Submission | |
| Language |
|
| Research Field | |
| 关键词 | |
| Committee Chair / Thesis Advisor | |
| Committee Members |
Primary PDF
| Thumbnail | Title | Date Uploaded | Actions |
|---|---|---|---|
|
|
Stock Behavior and Mispricing Puzzle of Chinese Dual-Listed Stocks on U.S. and Hong Kong Stock Exchanges During Listing Periods () | 2023-04-11 14:28:43 -0400 |
|
Supplemental Files
| Thumbnail | Title | Date Uploaded | Actions |
|---|