Corporate governance and market segmentation: evidence from the price difference between Chinese A and H shares

Lin Guo (), Liang Tang () and Shiawee Yang ()

Review of Quantitative Finance and Accounting, 2013, vol. 41, issue 2, 385-416

Abstract: This paper empirically examines whether the price difference between Chinese A shares, which are traded in the domestic market, and their matching H shares, which are traded in the Hong Kong market, can be explained by firms’ corporate governance characteristics. We find that the A- to H-share price premiums are higher for firms in which the controlling shareholders and corporate insiders have greater potential to expropriate wealth from outside investors. This result is robust when we use a variety of corporate governance variables specific to listed Chinese companies to explain the A-share price premiums and when we control for differences between domestic and foreign investors in required returns, degree of speculative trading, liquidity, information, and demand elasticity. Our findings highlight the important role of corporate governance in explaining the price difference in segmented stock markets. Copyright Springer Science+Business Media, LLC 2013

Keywords: Corporate governance; Government ownership; Market segmentation; Cross-listing; Cost of capital; Liquidity; G32; G34; G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-012-0313-0

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