Friend or Foe? The Role of State and Mutual Fund Ownership in the Split Share Structure Reform in China
Lingnan University - Department of Accounting and Finance
The Chinese University of Hong Kong (CUHK) - Department of Finance
Faculty of Business and Economics, University of Hong Kong
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
The recent split share structure reform in China involves the non-tradable shareholders proposing a compensation package to the tradable shareholders in exchange for the listing rights of their shares. We find that state ownership (the major owners of non-tradable shares) has a positive effect on the final compensation ratio. In contrast, mutual fund ownership (the major institutional owner of tradable shares) has a negative effect on the compensation ratio and especially in state owned firms. The evidence is consistent with our predictions that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight.
Number of Pages in PDF File: 32
Keywords: mutual funds, state ownership, share structure reform, shareholder activism, China
JEL Classification: G15, G18, G23Accepted Paper Series
Date posted: February 21, 2010
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