The Nontradable Share Reform in the Chinese Stock Market
Università di Torino
Bocconi University - Department of Finance
FEEM Working Paper No. 131.06
Nontradable shares (NTS) are an unparalleled feature of the ownership structure of Chinese listed companies and represented a major hurdle to domestic financial market development. After some failed attempts, in 2005 the Chinese authorities have launched a structural reform program aiming at eliminating NTS. In this paper, we evaluate the stock price effects of the actual implementation of this reform in 368 firms. The NTS reform generated a statistically significant 8 percent positive abnormal return over the event window, adjusting prices for the compensation requested by tradable shareholders. Results are consistent with the expectation of improved economic fundamentals such as better corporate governance and enhanced liquidity.
Number of Pages in PDF File: 24
Keywords: Chinese Equity Market, Financial Market Development, Split-Share Structure
JEL Classification: G14, G28, G32working papers series
Date posted: November 15, 2006
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