The impact of state ownership on share price informativeness: The case of the Split Share Structure Reform in China

This study examines the impact of state ownership on share price informativeness using the unique setting of the Split Share Structure Reform in China. This reform abolishes the trading restriction on shares held mainly by state shareholders. In doing so, it renders state shareholders' wealth m...

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Bibliographic Details
Published in:The British accounting review 2012-12, Vol.44 (4), p.248-261
Main Authors: Hou, Wenxuan, Kuo, Jing-Ming, Lee, Edward
Format: Article
Language:English
Subjects:
China
Conflict
Corporate governance
Evidence
Ownership
Pricing
Public enterprise
Public ownership
Reforms
Regression analysis
Securities trading
Share price informativeness
Split Share Structure Reform
State ownership
Stock prices
Stockholders
Studies
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Summary:This study examines the impact of state ownership on share price informativeness using the unique setting of the Split Share Structure Reform in China. This reform abolishes the trading restriction on shares held mainly by state shareholders. In doing so, it renders state shareholders' wealth more sensitive to share price movements and decreases their conflict of interests with private shareholders. This change is expected to strengthen the corporate governance incentives of state shareholders and reduce the information asymmetry in Chinese listed firms. This prediction is confirmed through empirical evidence of increased share price informativeness among firms that are more sensitive to the impact of this reform, i.e. those with more state ownership or restricted shares. These findings imply that this reform benefits the information environment and minority shareholders in the Chinese stock market.
ISSN:0890-8389
1095-8347
DOI:10.1016/j.bar.2012.09.003