Dissecting the Long-term Performance of the Chinese Stock Market

Domestically listed Chinese (A share) firms have lower stock returns than externally listed Chinese, developed and emerging country firms during 2000-2018. They also have lower net cash flows than matched unlisted Chinese firms. The underperformance in both stock and accounting returns is more pronounced for large A share firms, while small firms show no underperformance in either dimension. Investor sentiment explains low stock returns in the cross-country and within A share samples. Institutional deficiencies in IPO and delisting processes and weak corporate governance in terms of shareholder value creation are consistent with the underperformance in stock returns and net cash flows.

Keywords: Stock market, return, IPO, investment, net cash flow, behavioral bias

JEL Classification: G12, G15, G3

Suggested Citation: Suggested Citation

Allen, Franklin and Qian, Jun and Shan, Chenyu and Zhu, Julie, Dissecting the Long-term Performance of the Chinese Stock Market (May 3, 2023). Forthcoming, Journal of Finance, Available at SSRN: https://ssrn.com/abstract=2880021 or http://dx.doi.org/10.2139/ssrn.2880021