Why have many US-listed Chinese firms recently announced to go private?

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Why have many US-listed Chinese firms recently announced to go private?

 

Author: Wong, Owen
Title: Why have many US-listed Chinese firms recently announced to go private?
Degree: D.B.A.
Year: 2017
Subject: Hong Kong Polytechnic University -- Dissertations
Corporations -- China -- Finance
Stock companies -- China
Stock exchanges -- United States
Department: Faculty of Business
Pages: vi, 101 pages : illustrations
Language: English
OneSearch: https://www.lib.polyu.edu.hk/bib/99102198
URI: http://theses.lib.polyu.edu.hk/handle/200/9159
Abstract: It has long been considered prestigious for Chinese firms to list their common stocks on U.S. stock exchanges. Intriguingly, 29 of the 110 US-listed Chinese firms have announced going private in 2015. Preceding this wave were another 27 cases that occurred during the 2011 to 2014 period. The purpose of this study is to investigate the possible motivation behind US-listed Chinese firms going private. Previous studies on publicly traded firms making the decision to go private have proposed several hypotheses for explaining the drawbacks of being publicly traded on stock markets, including undervaluation (Maupin et al., 1984); agency problems connected to free cash flow (Jensen, 1986) and increased costs involved in the SEC reporting required by the SOX Act (Engel et al., 2007). This paper will examine whether these hypotheses help explain these two waves of Chinese ADRs going private. More importantly, I propose that the 2011-2014 going private wave has in large part been influenced by accounting problems and financial fraud in some Chinese firms (e.g. China MediaExpress, Longtop Financial and ChinaCast Education), which may have caused U.S. investors to mistrust and undervalue other Chinese ADRs, leading these undervalued companies to announce going private, and that the 2015 wave is largely attributable to Chinese government economic policies and regulatory changes that attempt to influence U.S.-listed Chinese companies to go private and then re-list on Chinese stock markets.

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