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Int. J. Financial Stud. 2017, 5(3), 19; https://doi.org/10.3390/ijfs5030019

Effect of Disproportional Voting Rights on Firm’s Market Performance: Evidence from Chinese Firms Cross-Listed on U.S. Exchanges

School of Economics and Management, Southwest Jiaotong University, Chengdu 610031, China
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Academic Editor: Nicholas Apergis
Received: 23 May 2017 / Revised: 23 August 2017 / Accepted: 30 August 2017 / Published: 8 September 2017
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Abstract

Dual-class firms face great criticism as it is believed that firms choose this structure to expropriate minority shareholders’ wealth. We compare market performance of Chinese dual-class firms with their single-class counterparts by constructing a list of Chinese firms cross-listed on U.S. exchanges. We find, contrary to the literature, that Chinese dual-class firms are outperforming in terms of market performance measured by Tobin’s Q, P/E ratio, and abnormal return in both subsequent years after the initial public offering (IPO). The reason for contrary results is that Chinese dual-class firms bond themselves to high U.S. standards from low local Chinese standards, and it is evident from the literature that when a firm bonds itself to high standards it shows a credible commitment towards minority shareholders’ rights, as well as focus on upright performance rather than investing in value-destroying projects and competes to survive in the market that imposes the high standards. View Full-Text
Keywords: dual-class firms; disproportional voting rights; market performance; Chinese cross-listed firms; initial public offering dual-class firms; disproportional voting rights; market performance; Chinese cross-listed firms; initial public offering
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Abdullah; Zhou, J.; Shah, M.H. Effect of Disproportional Voting Rights on Firm’s Market Performance: Evidence from Chinese Firms Cross-Listed on U.S. Exchanges. Int. J. Financial Stud. 2017, 5, 19.

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