Privatization and Risk Sharing: Evidence from the Split Share Structure Reform in China

Li, Kai; Wang, Tan; Cheung, Yan‐Leung; Jiang, Ping

doi:10.1093/rfs/hhr025

Cited by 291 publications

(124 citation statements)

References 16 publications

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“…Firth, Lin and Zou (2010) find that state ownership (mutual fund) has a positive (negative) effect on the final compensation ratio suggesting that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight. Li et al (2011) further document that the size of compensation paid is positively associated with both the proxy for risk-sharing gains by non-tradable shareholders when selling shares to tradable shareholders and the proxy for the price impact of more shares coming on the market following the reform. On 4 September 2005, the CSRC announced non-tradable share reform plans extending to all listed firms after successful piloting of the first batch of three companies on 9 May 2005 and the second batch of 42 companies on 20 June 2005.…”

Section: The Sssrmentioning

confidence: 81%

“…On 4 September 2005, the CSRC announced non-tradable share reform plans extending to all listed firms after successful piloting of the first batch of three companies on 9 May 2005 and the second batch of 42 companies on 20 June 2005. 4 This SSSR granted legitimate trading rights to the state-owned shares of listed SOEs, opening up the gate to China's secondary privatization (Li et al 2011;Liao, Liu and Wang 2014). Over the ensuing years, the SSSR has brought dramatic changes in the ownership structure of Chinese listed firms.…”

Section: The Sssrmentioning

confidence: 99%

“…We control for firm market capitalization (LOGMC) and price-to-book ratio (PB) prior to the SSSR. In light of Li et al (2011), we further control for the compensation ratio paid to the tradable shareholders by non-tradable shareholders negotiated during the SSSR and the percentage of non-tradable shares prior to the SSSR, denoted as COMP and NTS, respectively.…”

Section: Data and Modelsmentioning

confidence: 99%

“…A split-share structure reform (SSSR) took place in 2005 transformed the nontradable shares into tradable shares. This reform removed a particular type of market friction and fostered sweeping changes to the ownership structure of listed firms and led to further improvement of corporate performance and wealth gains by investors (Li et al 2011;Chen, Al-Najjar, and Al-Najjar 2012;Liu and Tian 2012). More importantly, this reform simultaneously led to further privatization of Chinese listed SOEs (Liao, Liu, and Wang 2014).…”

Section: Introductionmentioning

confidence: 99%

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China’s secondary privatization: new evidence on controlling shareholders tunnelling

Huang

2016

Applied Economics

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This article utilizes the 2005 split-share structure reform (SSSR) in China as a natural experiment and conducts difference-in-differences (DID) tests to analyse corporate governance changes among Chinese SOEs compared to POEs. We show that tunnelling significantly reduced in both POEs and SOEs after the SSSR. More importantly, we find a significant and positive 'privatization effect' on SOEs' tunnelling activities during the post-reform period suggesting the reductions of tunnelling were smaller among SOEs than POEs following the SSSR. In contrast, excess returns around the SSSR indicate that investors expected a negative 'privatization effect' on SOEs' tunnelling. These findings suggest that the quality of corporate governance did not improve among SOEs as a result of the secondary privatization as the stock market expected without fundamental changes to firm ownership and control following the SSSR. The benefits of privatization accrue to the government controlling shareholders rather than minority investors.

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Section: The Sssrmentioning

confidence: 81%

Section: The Sssrmentioning

confidence: 99%

Section: Data and Modelsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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China’s secondary privatization: new evidence on controlling shareholders tunnelling

Huang

2016

Applied Economics

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“…The reform helped remove significant market friction, leading to better incentive alignment between controlling and minority shareholders (e.g., Firth, Lin, & Zou, 2010;Li, Wang, Cheung, & Jiang, 2011;Chen, Jin, & Yuan, 2011;Beltratti, Bortolotti, & Caccavaio, 2012;Chen, Chen, Schipper, Xu, & Xue, 2012;and Hou, Kuo, & Lee, 2012). In addition, according to Green, Morris, and Tang (2010), the reform led to a positive impact on transparency.…”

Section: Related Literaturementioning

confidence: 99%

Risk-Return Dynamics of the Chinese Stock Market: A Comparison between A, B and H Shares

Mohanty¹,

Nandha²,

Khashabah³

et al. 2015

IBR

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This study compares the risk-return characteristics of the Chinese A shares with that of B and H shares over the period from January 1995 to June 2012. On average, B and H shares offer a better risk-adjusted return irrespective of whether the returns are measured in the Chinese Yuan (domestic perspective) or in the US dollar (foreign perspective) terms. However, a "timeline" analysis indicates that the relative advantage arising from investment in B or H shares may be nearing the end. This finding appears to be a consequence of investment schemes which allow domestic and foreign investors to cross each other"s territories after opening up of the Chinese market to foreign investors. Second, there is some evidence of exchange rate advantage for foreign investors, even though it is negligible. The results of our study suggest that any additional benefit generated by slight (average annual) appreciation of Yuan against the dollar is offset by an increase in volatility of returns measured in the US dollar.

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Investor Attention and Macroeconomic News Announcements: Evidence from Stock Index Futures

Chen

Liu

Lü

et al. 2015

Journal of Futures Markets

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This paper examines the role of investor attention in scheduled macroeconomic announcements, using intraday data from the Chinese Stock Index futures market. Overall, investor attention, proxied by the Baidu Search Index, is significantly higher in the Consumer Price Index (CPI) than in other macroeconomic news. Consistently, only the CPI announcement has a substantial short‐term impact on the price, liquidity, and volatility of the CSI 300 index futures. In addition, the reactions of futures price to CPI announcements are stronger to bad CPI news, more sensitive in high‐inflation periods, and less pronounced on Fridays, consistent with our investor attention behavior findings. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:240–266, 2016

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Privatization and Risk Sharing: Evidence from the Split Share Structure Reform in China

Cited by 291 publications

References 16 publications

China’s secondary privatization: new evidence on controlling shareholders tunnelling

China’s secondary privatization: new evidence on controlling shareholders tunnelling

Risk-Return Dynamics of the Chinese Stock Market: A Comparison between A, B and H Shares

Investor Attention and Macroeconomic News Announcements: Evidence from Stock Index Futures

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