Discussion Paper of the Institute for Organisational Economics 11/2014

Why Do Small Chinese Firms List on the Frankfurt Stock Exchange?
Hongmei Xu
November 2014



Recently, Chinese firms have become more active in attempting to go public on the Frankfurt Stock Exchange (FWB). This paper uses multivariate probit analysis to test the motivations of Chinese firms to list on the FWB. In general, Chinese firms are driven by the following motivations. Firstly, they pursue relatively more stringent listing standards and closer monitoring than the Hong Kong Growth Enterprise Market (GEM) and the London Alternative Investment Market (AIM) provide. Secondly, they are motivated by emerging needs for external financing. Moreover, this paper also examines the post-issue performance of Chinese listings on the FWB. It turns out that Chinese firms listed on the FWB show bad operating performance as well as bad stock performance. However, these are no exceptions since many Chi-nese firms listed on other foreign stock exchanges also underperform the market average.