Workshop Series: Qiaoqiao Zhu
Abstract: We investigate whether characteristics of the home country capital market environment, such as information disclosure and investor rights protection, continue to affect ADRs cross-listed in the U.S. Using microstructure measures as proxies for adverse selection, we find that characteristics of the home markets continue to be relevant, especially for emerging market firms. Less transparent disclosure, poorer protection of investor rights, and weaker legal institutions are associated with higher levels of information asymmetry. Developed market firms appear to be affected by whether or not home business laws are of common law or civil law legal origin. Our finding contributes to the bonding literature. It suggests that cross-listing in the U.S. should not be viewed as a substitute for improvement in the quality of local institutions, and attention must be paid to improve investor protection in order to achieve the full benefits of improved disclosure. Improvement in the domestic capital market environment can attract more investors even for U.S. cross-listed firms.
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Qiaoqiao Zhu is currently a Research Fellow in Finance at Queensland University of Technology since September 2009. He holds a Ph.D. in Economics from the University of Michigan. Prior to his post graduate study in the U.S., he graduated from Fudan University in Shanghai. His research interest concerns the impact of informational and behavioural frictions on the financial markets, often with an international aspect. His recent writings are on the information transparency of cross-listed firms, the market timing ability in exchange rate market and payoff policy changes when firms are listed on a higher quality market. He has presented his work to AEA, FMA and CFS conferences. His recent paper is invited to NBER summer institute meetings. He has served as a referee for American Economic Review, Emerging Markets Finance and Trade, and Research Grants Council, Hong Kong SAR. His published paper in the Journal of Empirical Finance has been covered by popular press such as the New York Times and the Economist.