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Ownership Restrictions and Stock-Price Behavior in China

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  • Kam C. Chan
  • Louis T. W. Cheng
  • Joseph K. W. Fung

Abstract

>i>This study examines the stock-price behavior of Chinese stock markets in the Shanghai and Shenzhen Stock Exchanges. There are strict stock-ownership restrictions in China. Foreign investors can only trade B shares, while domestic investors can only trade A shares. Under this two-tier trading system (A and B shares), we find that the stock-price behavior is very different between the two tiers and in most of the firms. A- and B-share prices do not have the same price dynamics. Essentially, A- and B-share prices tend to be driven by their own economic forces. The results are qualitatively the same by using firm-level data with or without exchange-rate adjustment. The result of cointegrated/noncointegrated A- and B-share prices of individual firms can be explained by the ownership distribution, liquidity, and financial characteristics of the firms.>/i>

Suggested Citation

  • Kam C. Chan & Louis T. W. Cheng & Joseph K. W. Fung, 2001. "Ownership Restrictions and Stock-Price Behavior in China," Chinese Economy, Taylor & Francis Journals, vol. 34(1), pages 29-48, January.
    • Handle: RePEc:mes:chinec:v:34:y:2001:i:1:p:29-48
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    Cited by:

    1. Chan, Kam C. & Fung, Hung-Gay & Thapa, Samanta, 2007. "China financial research: A review and synthesis," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 416-428.
    2. Gao, Y. & Tse, Y. K., 2004. "Market segmentation and information values of earnings announcements: Some empirical evidence from an event study on the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 13(4), pages 455-474.
    3. Chung-Hua Shen & Chien-Fu Chen & Li-Hsueh Chen, 2007. "An empirical study of the asymmetric cointegration relationships among the Chinese stock markets," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1433-1445.
    4. Guo, Enyang & Keown, Arthur J., 2009. "Privatization and non-tradable stock reform in China: The case of Valin Steel Tube & Wire Co., Ltd," Global Finance Journal, Elsevier, vol. 20(2), pages 191-208.

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