The relative pricing of cross-listed securities: The case of Chinese A- and H-share

In this paper, we use a sample of Chinese companies cross-listed in the A- and H-share markets and investigate the impact of liquidity and transparency on the H-share discount. We find that higher relative illiquidity of H-shares is associated with a higher H-share discount, relative to A-shares. In addition, more actively traded A-shares and infrequently traded H-shares are associated with a higher H-share discount. We also find that an increase in the number of analysts following a firm, firms with a higher percentage of A-share holdings by mutual funds, as well as firms audited by the Big 4 accounting firms are all associated with a smaller H-share discount. Overall, the results provide support for the notion that liquidity and transparency affect the relative pricing of A- and H-shares.