Managerial Structure and Stock Price Delay in China

Abstract

We investigate how characteristics of the board of directors and top management affect a firm’s stock price delay in China. Using A-shares listed on both Shanghai and Shenzhen stock exchanges from May 2003 to April 2014, we find firms with stocks in the highest price delay decile portfolio have fewer directors and top managers, lower state ownership, higher director and top management ownership, younger top management team, and lower probability of CEO-Chair separation. Firm-level analysis shows that the number of directors, the number of top managers, and CEO-Chair separation significantly negatively correlate with the stock price delay after controlling liquidity and investor attention variables. After we separate a firm’s price delay into director, top management, liquidity, attention, and state ownership components, we find only liquidity and attention components of price delay contribute to the monthly price delay premium of 1.47% from May 2004 to April 2014 in China.

Keywords: board of directors, top management, price delay, A-shares, China

JEL Classification: G11, G14, G34