Research On The Path And Effect Of Secondary Listing As Global Depository Receipts For Chinese Firms

In recent years,China has promoted a series of reforms for capital market open-up,in which overseas listing has been an important part.When the market is not yet fully open,the connectivity mechanism can speed up the process of opening up.As a result,In February 2022,China Securities Regulatory Commission issued policies to promote the connectivity mechanism,making global depositary receipts(GDRs)a popular way for Chinese firms to list overseas.From the perspective of Chinese firms,GDR is a type of security representing the rights of a few A shares,and it can be issued in foreign capital markets.Compared with IPO and Backdoor Listing,complex issuance procedure and expensive shells are not required for GDR issuers.Instead,they only need to convert existing or newly issued A shares into GDRs and issue them directly to overseas markets.Therefore,GDRs have unique advantages in terms of financing efficiency,costs,and transaction restrictions,etc.In 2018,when China launched the GDR connectivity mechanism for the first time,it only reached cooperation with UK,and set many restrictions on issuers and total investment,etc.,resulting in low listing activities of GDRs.The new policy optimizes the regulations and reaches cooperation with Switzerland and Germany.So far,China has achieved cooperation with UK,Switzerland,and Germany in terms of connectivity mechanism.Due to the difference in economic backgrounds and the GDR clause among these three countries,each stock exchange has its own advantages.Specifically,Swiss Stock Exchange has higher listing efficiency;London Stock Exchange is famous for great international influence,diversified economies,and higher market liquidity;Frankfurt Stock Exchange has a high level of valuation and liquidity,and the manufacturing industry of German leads the world.Therefore,a hot topic appears.How Chinese firms choose the appropriate listing location to match their needs for development when issuing GDRs?So far,many enterprises have listed in UK or Switzerland but not Germany.Therefore,this thesis analyzes the path and the economic consequences of two new energy companies,which listed in UK and Switzerland respectively,to provide suggestions for more companies intending to list by GDRs.The reasons for using the case study method are as follows:First,the choice of the listing location should be based on the features of business and stock exchanges.The analysis requires detailed information.Secondly,in China,there are still few companies listed in Europe,and the case study method provides an opportunity to explore an important phenomenon.Finally,the companies in this thesis are both engaged in new energy business,but have chosen different listing locations,so the cases are typical.The thesis firstly introduces policies,issuance procedure and the comparison of overseas listing alternatives.Secondly,the thesis summarizes market segmentation theories,theories of comparative advantage,transaction cost theories and related papers about depositary receipts,in order to analyze the path from the perspectives of strategies,financing efficiency,financing costs,and make comparative analysis;Finally,the thesis analyzes the economic consequences from the perspectives of financing efficiency,market reaction,corporate governance,and makes comparative analysis.Based on the case study,this thesis draws the following conclusions:Firstly,due to the convenience and subsidiarity of GDRs,it should serve as a secondary listing alternative,rather than a dual listing method.Secondly,issuers should take their own internationalization strategies and financing needs as the core factors for their location choice.Thirdly,the speculative arbitrage caused from the discount price is still an important factor affecting the financing efficiency,leading to low liquidity after the redemption period,so the value of GDR is not yet fully realized.The theoretical contributions of this thesis are as follows:Firstly,compared with the existing empirical analysis,which explore the correlation between a single factor and location selection,this thesis is based on the multifactor perspective,and provides a complementary exploration of capital markets in Switzerland and UK.In addition,most research on overseas listing focus on IPO and Backdoor Listing,and research on GDRs is mainly empirical.There are few papers exploring how to integrate GDRs with specific business,and to fulfill its role in financing and enhancing overseas influence.This thesis provides practical suggestions from case studies:Firstly,China’s regulatory authorities should strengthen the risk prevention of GDR pricing and the supervision of relevant agencies,to avoid excessive speculation and infringement on investors,and ensure a long-term financing efficiency.Secondly,in addition to the location selection,enterprises should pay attention to their core competitiveness and information disclosure.Thirdly,the transaction costs and the improvement of conversion mechanism have gradually reduced the GDR arbitrage,so investors should make objective judgments about companies,avoiding blind investment and excessive speculation.Based on the background of capital market opening up,this thesis solves the issues in the implementation of GDR,helps enterprises improve the issuance plan,and provides the regulatory department with suggestions on improving the system.