The Nontradable Share Reform in the Chinese Stock Market

Bernardo Bortolotti () and Andrea Beltratti
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Andrea Beltratti: Bocconi University

No 2006.131, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Nontradable shares (NTS) are an unparalleled feature of the ownership structure of Chinese listed companies and represented a major hurdle to domestic financial market development. After some failed attempts, in 2005 the Chinese authorities have launched a structural reform program aiming at eliminating NTS. In this paper, we evaluate the stock price effects of the actual implementation of this reform in 368 firms. The NTS reform generated a statistically significant 8 percent positive abnormal return over the event window, adjusting prices for the compensation requested by tradable shareholders. Results are consistent with the expectation of improved economic fundamentals such as better corporate governance and enhanced liquidity.

Keywords: Chinese Equity Market; Financial Market Development; Split-Share Structure (search for similar items in EconPapers)
JEL-codes: G14 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-fmk and nep-tra
Date: 2006-11
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Persistent link: http://EconPapers.repec.org/RePEc:fem:femwpa:2006.131

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