From Wall Street to Hong Kong : The Value of Dual Listing for China Concept Stocks

The U.S. stock market has long been the most popular venue for both foreign companies and global investors. The recent cross-border regulation tensions between the U.S. and China, however, have exposed many U.S.-listed China Concepts Stocks (CCS) to substantial de-listing risks, forcing them to pursue dual listings on the Hong Kong Stock Exchange (HKEX). In this paper, we quantify the economic value of dual-listing, using the SEC’s adoption of the final amendments implementing mandates of the Holding Foreign Companies Accountable Act (HFCAA) on December 2, 2021 as a natural experiment. We estimate that CCS with pre-shock dual-listing status on average have 14.6% higher returns, or 7.84 billion USD in market capitalization, than their peers listed only on the U.S. exchanges during a three-month period after the shock. Our findings survive a set of robustness checks, including parallel trends test, alternative treatment and control groups based on the qualified but not yet dual-listed CCS, and various sub-sample and placebo analysis. In addition to stock returns, the dual-listed CCS are also less adversely affected in trading volume, volatility, and liquidity. Our findings highlight the large economic impact of the escalating political U.S.-China tensions on the global financial markets