When the financial crisis hitNew York markets the market capitalization of the stocks turned only $68 million in stocks, these were the causes of the disproportionate troubles for the enterprises (Cetorelliand Peristiani, 2010).
In 2011, there were series of scandals that had caused the company to be hit the most. Many were misrepresentation in the financial reporting practices. There were issues that the companies found when the investors started to conduct due diligence. The Chinese companies stated that the accounting practices based on cultural differences were the reasons. Nevertheless, this fear caused the Chinese companies to have reduced investments. The investors started to fear that all the Chinese companies did not have regulatory systems and there was elevation of the performances. In this process, all the Chinese companies faced the brunt of the issue. The stock value in New York stock exchange reduced to 1/3rd of the value. Subsequent to the action in New York, the markets reacted in many ways (Huang, Elkinawy and Jain,2013). Of the 160 companies listed in Singapore, 10 companies were delisted. This lead to negative spiraling of impacts (Eng and Lin, 2012). To gain credibility of the process, the Chinese companies agreed to be audited from 2013 (Asker, Farre-Mensa and Ljungqvist, 2014).
There are changes in the corporate governance practice and there are a number of companies that still face profits in this system. Some companies continue to make profit in this paradigm. Qunar, a Chinese travel booking services, raised $167 million on November 1 with the share prices surging to 89% above the initial offering. 58.com raised over $187 million in NASDAQ market. However, there is considerable apprehension by the investors due to the previous events. More than 100 stocks were delisted by the NASDAQ for failure of compliance with their regulatory standards between 2011 and 2012 (Sarkissian and Schill, 2012). This caused a loss of $40 billion to the investors and this apprehension continues to reverberate in the investment community.
When a company invests in the foreign markets, the macro environment issues of the foreign nation come into play (Ke, Rui and Yu, 2012). Hence the market risks of the foreign nations cause the risks to the domestic Chinese companies. They need to understand the political risks and economic risks that the company needs to face in this system. Chinese companies must carefully conduct their due diligence when they want to enter into a foreign market. The foreign companies would conduct their due diligence.Hence the Chinese companies must be compliant with the local policies.