How Do Corporate Control Rights Transactions Create Shareholder Value? Evidence from China

Asian Finance Association (AsianFA) 2014 Conference

Asian Finance Association (AsianFA) 2014 Conference Paper

39 Pages Posted: 15 Feb 2014 Last revised: 15 Jun 2014

See all articles by Liping Dong

Liping Dong

Beijing Wuzi University

Konari Uchida

Kyushu University - Faculty of Economics

Xiaohong Hou

China University of Mining and Technology (CUMT)

Date Written: February 15, 2014

Abstract

We investigate the stock price performance of companies that become a block trade target in China where unique institutional characteristics exist. As with US evidence, stock prices of target companies positively react to the announcement of block trades. The positive effect of block trades becomes small as the target firm had high director ownership before the block trade. Publicly tradable share (PTS) transactions experience better stock price performance than non-publicly tradable share (NPTS) transactions do probably because share non-tradability provides NPTS bidders with only weak incentives of value maximization. Meanwhile, the divergence of bidding price from the market price does not impede value creation. We find no evidence that shareholders of SOEs receive gains by transferring the control rights to private parties.

Keywords: Block trade; Non-publicly tradable shares; Event study: Long-term stock performance; China

JEL Classification: G34; G38

Suggested Citation

Dong, Liping and Uchida, Konari and Hou, Xiaohong, How Do Corporate Control Rights Transactions Create Shareholder Value? Evidence from China (February 15, 2014). Asian Finance Association (AsianFA) 2014 Conference ; Asian Finance Association (AsianFA) 2014 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2396514 or http://dx.doi.org/10.2139/ssrn.2396514

Liping Dong (Contact Author)

Beijing Wuzi University ( email )

Chaoyang North Rd
Tongzhou, Beijing
China

Konari Uchida

Kyushu University - Faculty of Economics ( email )

6-19-1, Hakozaki
Higashi-ku
Fukuoka, Fukuoka 8128581
Japan

Xiaohong Hou

China University of Mining and Technology (CUMT) ( email )

Xuzhou, Jiangsu
China

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