Float,Speculation,and Stock Prices: Evidence from the Share Structure Reform in China
Prior to April 2005,only one third of the shares issued by exchange-listed companies in China are publicly tradable. The other two thirds,mainly owned by Chinese government agencies or government-linked enterprises,are prohibited from public trading. On April 29,2005,the Chinese Securities Regulatory Committee announced a reform plan that aims to abolish the split-share structure by converting all non-tradable shares to be publicly tradable. We investigate the consequences of this unique event and shed light on how share float affects speculation and stock prices. Firstly,we find that tradable A-shares command a 60％ price premium on average over non-tradable A-shares and this price premium contains both liquidity and speculation components. Secondly,the share structure reform increases share float,improves liquidity and,at the same time,dampens speculative trading. Firms that had low liquidity and low speculative trading before the reform experienced substantial increases in share turnover after the reform. In contrast,firms that had high liquidity and high speculative trading before the reform had no increase in share turnover. Thirdly,stock prices drop substantially on the day when share float increases due to the reform. However,despite the drop in stock prices,shareholder wealth increases by 15％ on average. The largest price drop and the smallest wealth gain occur in firms that had the highest speculative trading before the reform,which further indicates that the reform dampens speculative trading. Lastly,although only A-shares are involved in the share structure reform,we find that B-share turnover increases significantly after the reform and the B-share price discount narrows substantially.
Chuan-Yang Hwang Shaojun Zhang Yanjian Zhu
Nanyang Business School,Nanyang Technological University,Singapore,639798
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）