Department of Marketing
Privatization and risk sharing: Evidence from the split share structure reform in China
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. © 2011 The Author. Published by Oxford University Press on behalf of the Centre for Crime and Justice Studies (ISTD). All rights reserved.
Source Publication Title
Review of Financial Studies
Oxford University Press
Link to Publisher's Edition
Li, Kai, Tan Wang, Yan-Leung Cheung, and Ping Jiang. "Privatization and risk sharing: Evidence from the split share structure reform in China." Review of Financial Studies 24.7 (2011): 2499-2525.