The Impact of State Ownership on Share Price Informativeness: The Case of the Split Share Structure Reform in China

48 Pages Posted: 22 Mar 2012 Last revised: 14 Apr 2012

See all articles by Wenxuan Hou

Wenxuan Hou

University of Edinburgh - Business School; Shanghai Lixin University of Accounting and Finance

Jing-Ming Kuo

University of Birmingham - Birmingham Business School

Edward Lee

University of Manchester - Alliance Manchester Business School

Date Written: December 20, 2011

Abstract

We examine the impact of state ownership on share price informativeness by using the unique setting of the Split Share Structure Reform in China. This reform abolishes the trading restriction of shares held mainly by state shareholders, which in turn renders their wealth more sensitive to share price movement and decreases their conflict of interest with private shareholders. We expect this change to strengthen the corporate governance incentives of state shareholders and reduce the information asymmetry of Chinese listed firms. We confirm this prediction through empirical evidence of increased share price informativeness among firms that are more sensitive to the impact of this reform, i.e. those with more state ownership or restricted shares. Our finding implies that this reform benefits the information environment and minority shareholders of the Chinese stock market.

Keywords: State ownership, Share price informativeness, Split Share Structure Reform, China

JEL Classification: G14, G15, G30, G38

Suggested Citation

Hou, Wenxuan and Kuo, Jing-Ming and Lee, Edward, The Impact of State Ownership on Share Price Informativeness: The Case of the Split Share Structure Reform in China (December 20, 2011). British Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2026405

Wenxuan Hou (Contact Author)

University of Edinburgh - Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

HOME PAGE: http://www.wenxuanhou.com

Shanghai Lixin University of Accounting and Finance ( email )

Jing-Ming Kuo

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
University House
Birmingham, Birmingham B15 2TT
United Kingdom

Edward Lee

University of Manchester - Alliance Manchester Business School ( email )

Booth St. West (Crawford House)
Manchester, M15 6PB
United Kingdom

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