A corporate governance explanation of the A-B share discount in China

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)125-147
Journal / PublicationJournal of International Money and Finance
Issue number2
Publication statusPublished - Mar 2012
Externally publishedYes


B-shares listed in China are traded at substantial discounts to their corresponding A-shares although they have identical rights. We offer a governance explanation and suggest that relative to domestic investors, foreign investors care more about a firm's governance quality. Results are supportive, as the B-share price discount is higher for firms that have weaker governance characterized by 1) higher ownership concentration, 2) ineffective boards with a higher proportion of directors appointed by the parent company, 3) lower dividend payouts, and 4) higher levels of information asymmetry. © 2011 Elsevier Ltd.

Research Area(s)

  • A-B Share discount, Corporate governance, Investor base, Valuation