TY - JOUR
T1 - The stock market reaction to the 2005 split share structure reform in China
AU - Beltratti, Andrea
AU - Bortolotti, Bernardo
AU - Caccavaio, Marianna
N1 - Funding Information:
We thank Takeshi Inoue of Nomura Institute of Capital Markets Research for providing us with data and key information, Kai Li, William L. Megginson, Gary Wan (Linklaters), Sun Jie, Paolo Colla, an anonymous referee and participants at the 2006 FEEM Conference on Financial Market Development in China in Milan, the 30th Anniversary JBF Conference in Beijing, the 2006 JAE Conference on Financial System Reform and Monetary Policies in Asia at Hitotsubashi University, the 2007 IFC International Research Conference on Corporate Governance in Emerging Markets in Istanbul and at seminars at Bocconi University, FEEM, CSEF, Aberdeen Business School, University of Melbourne and ECB for useful comments. Valentina Milella and Laura Pellizzola provided excellent research assistance. The usual disclaimer applies. Financial support from Paolo Baffi Centre, Bocconi University , is gratefully acknowledged.
PY - 2012/9
Y1 - 2012/9
N2 - During 2005-2006, the Chinese government implemented the split share structure reform, aimed at eliminating non-tradable shares (NTS), i.e. the shares typically held by the State or by politically connected institutional investors that were issued at the early stage of financial market development. Our analysis, based on the time series of risk factors and on the cross-section of abnormal returns, confirms that the split share structure reform was particularly beneficial for small stocks, stocks characterized by historically poor returns, stocks issued by companies with low transparency and weak governance, and for less liquid stocks. Historically neglected stocks also witnessed an increase in the volume of trading and market prices. We conclude that the reform laid down the conditions for important future changes in ownership, liquidity and corporate governance in China.
AB - During 2005-2006, the Chinese government implemented the split share structure reform, aimed at eliminating non-tradable shares (NTS), i.e. the shares typically held by the State or by politically connected institutional investors that were issued at the early stage of financial market development. Our analysis, based on the time series of risk factors and on the cross-section of abnormal returns, confirms that the split share structure reform was particularly beneficial for small stocks, stocks characterized by historically poor returns, stocks issued by companies with low transparency and weak governance, and for less liquid stocks. Historically neglected stocks also witnessed an increase in the volume of trading and market prices. We conclude that the reform laid down the conditions for important future changes in ownership, liquidity and corporate governance in China.
KW - Chinese stock market
KW - Corporate governance
KW - Financial reform
KW - Neglected stocks
KW - Ownership structure
KW - Privatization
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U2 - 10.1016/j.pacfin.2012.01.004
DO - 10.1016/j.pacfin.2012.01.004
M3 - Review article
AN - SCOPUS:84857594634
SN - 0927-538X
VL - 20
SP - 543
EP - 560
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
IS - 4
ER -