A growing number of mainland Chinese real estate firms went public over the past decade. Some floated their shares in Hong Kong, while others were listed on mainland stock exchanges. This paper empirically examines the determinants of their initial public offering (IPO) location choice. Based on probit analysis, we found that developers with better unobserved quality are more likely to list in Hong Kong than in the mainland. State ownership, gearing ratio, and property market performance are other significant determinants of IPO locations. A further test shows that the degree of IPO underpricing is larger for firms listed in mainland China than those listed in Hong Kong. All these findings are consistent with the signaling hypothesis-good firms signal their quality to investors by listing in market with more stringent regulatory environment where other firms cannot afford to imitate.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.