The Stock Market Reaction to the 2005 Non-Tradable Share Reform in China

41 Pages Posted: 20 May 2011

See all articles by Andrea Beltratti

Andrea Beltratti

Bocconi University - Department of Finance

Bernardo Bortolotti

Bocconi University; University of Turin

Marianna Caccavaio

Università Bocconi

Date Written: May 2011


During 2005-2006, the Chinese government implemented a reform aimed at eliminating the so-called non-tradable shares (NTS) 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 NTS reform affected stock prices, particularly benefiting small stocks, stocks characterized by historically poor returns, stocks issued by companies with less transparent accounts and poorer governance, and less liquid stocks. Historically neglected stocks also witnessed an increase in the volume of trading and market prices.

Keywords: Ownership structure, Chinese stock market, financial reform, corporate governance, privatization, neglected stocks

JEL Classification: G14, G28, G32

Suggested Citation

Beltratti, Andrea and Bortolotti, Bernardo and Caccavaio, Marianna, The Stock Market Reaction to the 2005 Non-Tradable Share Reform in China (May 2011). ECB Working Paper No. 1339. Available at SSRN:

Andrea Beltratti (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136

Bernardo Bortolotti

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100

Marianna Caccavaio

Università Bocconi ( email )

Piazza Sraffa 11
Milan, MI 20136

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