Search

On June 6, 2018, China has adopted a new policy that allows overseas-listed Chinese companies to launch secondary listings (hereafter, returned-global Chinese IPOs) in the domestic market. This study examines how the returned-global Chinese IPOs affect financial reporting quality, information environments, and IPO pricing in the domestic market. We find that these newly public companies in China exhibit lower discretionary accruals (and their components), lower stock price synchronicity, and lower first-day underpricing upon IPOs. Our difference-in-differences tests reveal that IFRS convergence in China mitigates overseas listing advantage of the returned-global firms. Overall, this study highlights the economic benefits of overseas listing of the returned-global Chinese IPOs and the impact of the change in financial accounting standards on the IPO market. Our evidence highlights the bright side of the recent regulatory change in China.

This paper proposes a risk-based explanation for the book-to-market (B/M) effect. I decompose B/M into net operating asset-to-market (NOA/M) and net financing asset-to-market (NFA/M) components. Portfolio analysis shows that (i) positive B/M, NOA/M and NFA/M are positively related to future returns and (ii) negative B/M, NOA/M and NFA/M are negatively related to future returns. To the extent that positive B/M, NOA/M and NFA/M act as measures of asset risk and negative B/M, NOA/M and NFA/M act as inverse measures of borrowing risk, the nonlinear relations between B/M, NOA/M and NFA/M and future returns provide some evidence to support the risk-based explanation for the book-to-market effect in stock returns.