Friend or foe? The role of state and mutual fund ownership in the split share structure reform in China

Michael Arthur FIRTH, Chen LIN, Hong ZOU

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

111 Citations (Scopus)

Abstract

The recent split share structure reform in China involves the nontradable shareholders proposing a compensation package to the tradable shareholders in exchange for the listing rights of their shares. We find that state ownership (the major owners of nontradable shares) has a positive effect on the final compensation ratio. In contrast, mutual fund ownership (the major institutional owner of tradable shares) has a negative effect on the compensation ratio and especially in state-owned firms. The evidence is consistent with our predictions that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight.
Original languageEnglish
Pages (from-to)685-706
Number of pages22
JournalJournal of Financial and Quantitative Analysis
Volume45
Issue number3
DOIs
Publication statusPublished - 1 Jun 2010

Fingerprint

Role of the state
Shareholders
Mutual funds
China
Ownership
Owners
Incentives
Prediction
Compensation packages
State ownership

Cite this

@article{5b71cf57c415460f8c44acb9b70f8b35,
title = "Friend or foe? The role of state and mutual fund ownership in the split share structure reform in China",
abstract = "The recent split share structure reform in China involves the nontradable shareholders proposing a compensation package to the tradable shareholders in exchange for the listing rights of their shares. We find that state ownership (the major owners of nontradable shares) has a positive effect on the final compensation ratio. In contrast, mutual fund ownership (the major institutional owner of tradable shares) has a negative effect on the compensation ratio and especially in state-owned firms. The evidence is consistent with our predictions that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight.",
author = "FIRTH, {Michael Arthur} and Chen LIN and Hong ZOU",
year = "2010",
month = "6",
day = "1",
doi = "10.1017/S0022109010000190",
language = "English",
volume = "45",
pages = "685--706",
journal = "Journal of Financial and Quantitative Analysis",
issn = "0022-1090",
publisher = "Cambridge University Press",
number = "3",

}

Friend or foe? The role of state and mutual fund ownership in the split share structure reform in China. / FIRTH, Michael Arthur; LIN, Chen; ZOU, Hong.

In: Journal of Financial and Quantitative Analysis, Vol. 45, No. 3, 01.06.2010, p. 685-706.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

TY - JOUR

T1 - Friend or foe? The role of state and mutual fund ownership in the split share structure reform in China

AU - FIRTH, Michael Arthur

AU - LIN, Chen

AU - ZOU, Hong

PY - 2010/6/1

Y1 - 2010/6/1

N2 - The recent split share structure reform in China involves the nontradable shareholders proposing a compensation package to the tradable shareholders in exchange for the listing rights of their shares. We find that state ownership (the major owners of nontradable shares) has a positive effect on the final compensation ratio. In contrast, mutual fund ownership (the major institutional owner of tradable shares) has a negative effect on the compensation ratio and especially in state-owned firms. The evidence is consistent with our predictions that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight.

AB - The recent split share structure reform in China involves the nontradable shareholders proposing a compensation package to the tradable shareholders in exchange for the listing rights of their shares. We find that state ownership (the major owners of nontradable shares) has a positive effect on the final compensation ratio. In contrast, mutual fund ownership (the major institutional owner of tradable shares) has a negative effect on the compensation ratio and especially in state-owned firms. The evidence is consistent with our predictions that state shareholders have incentives to complete the reform quickly and exert political pressure on mutual funds to accept the terms without a fight.

UR - http://commons.ln.edu.hk/sw_master/1635

U2 - 10.1017/S0022109010000190

DO - 10.1017/S0022109010000190

M3 - Journal Article (refereed)

VL - 45

SP - 685

EP - 706

JO - Journal of Financial and Quantitative Analysis

JF - Journal of Financial and Quantitative Analysis

SN - 0022-1090

IS - 3

ER -