Overseas Listing Decisions of Chinese Firms: Based on the Maximization of Controlling Shareholders’ Returns

Abstract

We construct a firm value model and a controlling shareholders’ expected returns model to analyze the trade-off decision of whether to list in developed overseas markets. We identify a threshold level of net cash flow as the key decision criterion: when a firm’s net cash flow exceeds this threshold, controlling shareholders’ expected returns increase, making overseas listing advantageous; otherwise, the firm should avoid listing overseas. The threshold rises with a higher net cash flow multiplier, weaker investor protection, and lower capital cost for unlisted firms, but decreases with a lower net cash flow multiplier, stronger investor protection, higher capital cost, and greater compliance cost for firms listed overseas. Further analysis shows that overseas listing decisions aimed at maximizing controlling shareholders’ returns also enhance minority shareholders’ returns and overall firm value. We develop a quantitative framework for overseas listing decisions from the perspective of controlling shareholders and offer insights for policymakers and practitioners in cross-border capital markets.