Privatization and risk sharing: Evidence from the split share structure reform in China

Author(s)
Author(s)
Li, K.
Wang, T.
Jiang, P.
Date Issued
2011
Publisher
Oxford University Press
Journal
The Review of Financial Studies
Volume
24
Issue
7
Start page
2499
End page
2525
Abstract
We study the share privatization process in China to investigate whether and how the removal of market frictions is associated with efficiency gains. Prior to the reform, domestic A-shares were divided into tradable and non-tradable shares. As a result of the reform, holders of non-tradable shares compensated holders of tradable shares in order to make their shares tradable. We show that size is positively associated with both the gain in risk sharing and the price impact of more shares coming on the market as a result of the reform. Our study highlights the role of risk sharing in China's share issue privatization process.
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DOI
SFU Affiliated Publication
No
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