Privatization and Risk Sharing: Evidence from the Split Share Structure Reform in China

Kai Li, Tan Wang, Stephen Yan-Leung Cheung, Ping Jiang
2008 Social Science Research Network  
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
more » ... 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. (JEL G11, G12, G18, G32) We thank the editor, two anonymous referees,
doi:10.2139/ssrn.1108108 fatcat:jgiuxndtdngtnn5xxhpew6yhmm