Event Study on the Pilot Program of China's A-Share Reform
After many years of debate, in 2005, China decided to end the split share structure, which was seen as the major problem in China stock market. Two batches of pilot program were conducted for experimental reforms on the A-share structure from May to August 2005. Soon after these pilot program, China started reform for all the listed companies. nnIn this paper we study the process and the mechanics for calculating the compensate of China's A-share reform. Then we estimate the Betas for companies involved. The Event Study method is applied to test the capital market efficiency by examining the price effect around the days of announcing the reform (the event). We found (a). There is no universally accepted single method can be applied to all the involved companies for their proposals to calculate the compensation to the tradable share (TS) holders, in order to convert the non-tradable share (NTS) into the TS. Although many methods were proposed, they could be summarized into three main streams. (b). There are low correlations between the monthly market returns and individual firm's monthly returns. (c). There is significant price effect upon the announcement of reform. A semi-strong form of market efficiency is supported by the evidence of significant price reaction to announcement. (d). The stocks perform differently before and after the reform.
M00107 | (wh) | Available |
No other version available