Market Segmentation and Share Price Premium : Evidence from Chinese Stock Markets

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)43-61
Journal / PublicationCommunication Research
Volume4
Issue number1
Publication statusPublished - Apr 2005
Externally publishedYes

Abstract

In China, domestic firms can issue both domestic (A) and foreign (B or H) shares. Domestic investors can only invest in A-shares and foreign investors only in B- and H-shares. Unlike other emerging markets, domestic A-shares are sold at a premium relative to foreign shares. We conjecture that the premium for domestic shares is determined by the limited alternative investment opportunities available to retail investors. The empirical evidence indicates that cross-sectional variation in the premiums for A-shares is negatively related to the relative supply of A-shares, and positively related to the relative supply of foreign shares. There is also evidence that the premiums can be explained by the speculative nature of retail investors, liquidity risk and firm size (market value of free-floating shares). © 2005, Sage Publications India Pvt. Ltd. All rights reserved.

Research Area(s)

  • Chinese stock market, Market segmentation, ownership restriction

Bibliographic Note

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