Does residual state ownership increase stock return volatility? Evidence from China's secondary privatization

Feng Xie, Hamish Anderson, Jing Chi and Jing Liao

Journal of Banking & Finance, 2019, vol. 100, issue C, 234-251

Abstract: Using hand-collected data, we find residual state ownership is negatively related to stock return volatility, following China's secondary privatization initiated by the non-tradable share reform. Conservative corporate policies are channels through which residual state ownership reduces stock return volatility. Further, the volatility-mitigating effect is more prevalent in firms in which the government has greater influence on corporate decisions. However, the volatility-mitigating effect is temporary, lasting up to three years after state shares become fully tradable. The evidence suggests the government can send credible signals by retaining state ownership, which reduces investor uncertainty. However, investors must weigh the positive signaling effect of residual state ownership in reducing uncertainty, surrounding sudden policy changes, against the inefficiencies of state control.

Keywords: Investor uncertainty; Residual state ownership; Stock return volatility; China (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426619300184
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:100:y:2019:i:c:p:234-251

DOI: 10.1016/j.jbankfin.2019.01.012

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().