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Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges

Henry Agyei-Boapeah, Yuan Wang, Tunyi Tunyi Abongeh, Michael Machokoto, Fan Zhang

International Journal of Accounting & Information Management, Volume: 27, Issue: 2, Pages: 224 - 243

Swansea University Author: Tunyi Tunyi Abongeh

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DOI (Published version): 10.1108/ijaim-12-2017-0146

Abstract

Purpose: Drawing on a cost–benefit perspective, this paper aims to explore the relation between information asymmetry and the decision to delist from stock exchanges during periods of uncertainty. Specifically, it investigates the role of firms’ intangible investments and the availability of alterna...

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Published in: International Journal of Accounting & Information Management
ISSN: 1834-7649
Published: Emerald 2019
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URI: https://cronfa.swan.ac.uk/Record/cronfa65117
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spelling v2 65117 2023-11-26 Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges eefe2792c8eed5b49feede33981dfa53 Tunyi Tunyi Abongeh Tunyi Tunyi Abongeh true false 2023-11-26 BAF Purpose: Drawing on a cost–benefit perspective, this paper aims to explore the relation between information asymmetry and the decision to delist from stock exchanges during periods of uncertainty. Specifically, it investigates the role of firms’ intangible investments and the availability of alternative sources of finance on the decision to delist from foreign stock markets. Design/methodology/approach: The study takes advantage of a natural experiment in which cross-listed Chinese firms facing uncertainty in US markets because of widespread allegations of accounting fraud decide on whether to remain listed or voluntarily delist. The decision to delist is modelled as a function of the level of information asymmetry between firms and their stakeholders and the availability of alternative financing, while controlling for other drivers of firms’ delisting decision. The data used in the empirical analyses cover a hand-collected sample of 91 Chinese firms voluntarily delisting from US stock markets between 2010 and 2016. This sample is matched with an equal sample of Chinese firms, which remained listed in US stock markets during the same period. A probit regression model accounting for fixed effects is used. Findings: There is a significant positive relationship between investments in intangible assets and firms’ decision to delist. Moreover, the positive intangibles−delisting nexus is accentuated by the availability of alternative sources of financing. Collectively, the results are consistent with the theoretical argument that the higher information asymmetry associated with intangible assets may increase the cost of staying listed on stock exchanges, particularly in periods of uncertainty (captured in this study by accounting fraud allegations targeting cross-listed firms). The results have important implications for corporate managers, capital market participants and policymakers. Practical implications: Policymakers and standard setters must continue to work to improve the accounting regulations of intangible assets and to promote the adoption of global accounting standard across both emerging and advanced economies. Originality/value: The study exploits a unique natural experimental setting to explore why cross-listed firms delist. The underlying theoretical framework to explain delisting is new. This framework captures the role of information asymmetry, uncertainty and alternative financing in explaining the cost and benefits of remaining listed on a foreign market. Journal Article International Journal of Accounting &amp; Information Management 27 2 224 243 Emerald 1834-7649 China, Intangible assets, Information asymmetry, US stock exchange, Voluntary delisting 7 5 2019 2019-05-07 10.1108/ijaim-12-2017-0146 http://dx.doi.org/10.1108/ijaim-12-2017-0146 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University Not Required 2024-01-03T11:29:10.0062717 2023-11-26T11:25:47.4249529 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Henry Agyei-Boapeah 1 Yuan Wang 2 Tunyi Tunyi Abongeh 3 Michael Machokoto 4 Fan Zhang 5
title Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
spellingShingle Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
Tunyi Tunyi Abongeh
title_short Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
title_full Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
title_fullStr Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
title_full_unstemmed Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
title_sort Intangible investments and voluntary delisting: Mass exodus of Chinese firms from US stock exchanges
author_id_str_mv eefe2792c8eed5b49feede33981dfa53
author_id_fullname_str_mv eefe2792c8eed5b49feede33981dfa53_***_Tunyi Tunyi Abongeh
author Tunyi Tunyi Abongeh
author2 Henry Agyei-Boapeah
Yuan Wang
Tunyi Tunyi Abongeh
Michael Machokoto
Fan Zhang
format Journal article
container_title International Journal of Accounting &amp; Information Management
container_volume 27
container_issue 2
container_start_page 224
publishDate 2019
institution Swansea University
issn 1834-7649
doi_str_mv 10.1108/ijaim-12-2017-0146
publisher Emerald
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1108/ijaim-12-2017-0146
document_store_str 0
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description Purpose: Drawing on a cost–benefit perspective, this paper aims to explore the relation between information asymmetry and the decision to delist from stock exchanges during periods of uncertainty. Specifically, it investigates the role of firms’ intangible investments and the availability of alternative sources of finance on the decision to delist from foreign stock markets. Design/methodology/approach: The study takes advantage of a natural experiment in which cross-listed Chinese firms facing uncertainty in US markets because of widespread allegations of accounting fraud decide on whether to remain listed or voluntarily delist. The decision to delist is modelled as a function of the level of information asymmetry between firms and their stakeholders and the availability of alternative financing, while controlling for other drivers of firms’ delisting decision. The data used in the empirical analyses cover a hand-collected sample of 91 Chinese firms voluntarily delisting from US stock markets between 2010 and 2016. This sample is matched with an equal sample of Chinese firms, which remained listed in US stock markets during the same period. A probit regression model accounting for fixed effects is used. Findings: There is a significant positive relationship between investments in intangible assets and firms’ decision to delist. Moreover, the positive intangibles−delisting nexus is accentuated by the availability of alternative sources of financing. Collectively, the results are consistent with the theoretical argument that the higher information asymmetry associated with intangible assets may increase the cost of staying listed on stock exchanges, particularly in periods of uncertainty (captured in this study by accounting fraud allegations targeting cross-listed firms). The results have important implications for corporate managers, capital market participants and policymakers. Practical implications: Policymakers and standard setters must continue to work to improve the accounting regulations of intangible assets and to promote the adoption of global accounting standard across both emerging and advanced economies. Originality/value: The study exploits a unique natural experimental setting to explore why cross-listed firms delist. The underlying theoretical framework to explain delisting is new. This framework captures the role of information asymmetry, uncertainty and alternative financing in explaining the cost and benefits of remaining listed on a foreign market.
published_date 2019-05-07T11:29:11Z
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