Cross-listing and foreign direct investment: an institutional arbitrage perspective on Chinese multinational enterprises

Abstract

Through the lens of institutional arbitrage, we examine the impact of cross-listing on foreign direct investment by multinational enterprises (MNEs) based in China. We propose that the advantages associated with cross-listing, identified as the credibility premium and mobility premium, significantly contribute to the international competitiveness of MNEs in constructing trade networks and overcoming market entry challenges. Drawing on an analysis of over 20,000 foreign subsidiaries from China, we find that cross-listing firms are more likely to have larger FDI portfolios and broader geographic dispersion than non-cross-listing firms. Moreover, the magnitude of these advantages depends on the institutional distance between the home and host countries. Our findings suggest that the benefits of cross-listing, particularly in terms of portfolio scope and geographic dispersion, are more pronounced in host countries with mature institutional frameworks.