On the Chinese B-share price discount puzzle: Some new evidence

Ali F. Darrat, Otis Gilley, Yanhui Wu and Maosen Zhong

Journal of Business Research, 2010, vol. 63, issue 8, 895-902

Abstract: Since February 2001, the Chinese Securities Regulatory Commission allowed domestic trade in foreign-currency denominated shares (B-shares) whose trade was originally restricted to foreign investors. We investigate possible effects of lifting the ownership restriction on the B-share discounts and explore why the discount persists even after removing the restriction. The discount is the percentage by which the B-shares are priced less than the otherwise identical Chinese-currency denominated shares held by domestic investors (A-shares). The results suggest that prices in the B- and A-share markets are closely linked over the long-run and that this equilibrium relationship strengthened in the post-lifting period. Our results further rule out information asymmetry as a reason for the continuation of the discount and support instead the importance of firm size and relative supply of the B-shares.

Keywords: Dual-listed; shares; Chinese; stock; markets; B-share; price; discounts (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:63:y:2010:i:8:p:895-902

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