As the calendar turns summer and another class leaves Fletcher, we reflect on some of the fascinating research we’ve supported from students in the past. In this post, we revisit MIB ’16 graduate Nathan Holdstein’s research on investor relations for companies in Mainland China.
For firms at various stages of development, listing shares on a major international stock exchange is the penultimate measurement for establishing oneself as a “successful” business. This is especially true of firms based in Mainland China. In many cases, firms choose to list shares outside of the country, mostly in Hong Kong and the United States, either as a primary listing or to supplement existing listings on local bourses. Those that do so can face intense scrutiny from market regulators, investors, media, and the general public. What can they do to better demonstrate the value they will bring to shareholders in international markets?
My capstone looks at the investor relations component, and why Chinese companies should more actively engage key market players to better show their value. I am hypothesizing that companies doing so have larger percentages of institutional shareholders, which will reduce volatility and push the price up over the long-term. This occurs in large part because those firms that are successful will provide the market with a steady stream of reports, forward guidance, and general news updates to give analysts and stakeholders a better understanding of what the company’s value is.
With support from the Institute for Business in the Global Context, I traveled to the Special Administrative Region in Hong Kong to meet experts and practitioners of investor relations and finance there. Given its proximity to the Mainland and relatively market oriented monetary regulation & capital controls, it is no surprise that a number of Chinese companies choose to go public on the Hong Kong Stock Exchange. I wanted to get a better understanding of what it takes to have a successful listing in Hong Kong, in which the share price remains relatively stable and increases in value.