Title

Asset pricing in segmented capital markets : preliminary evidence from China-domiciled companies

Document Type

Journal article

Source Publication

Pacific Basin Finance Journal

Publication Date

1-1-1998

Volume

6

Issue

3/4

First Page

307

Last Page

319

Keywords

Chinese financial markets, International asset pricing, Market segmentation

Abstract

A number of Chinese companies have issued shares to investors within China (A shares) and issued shares to foreign investors (B, H, and N shares). All these shares have equal rights although A shares can only be sold to, and traded among, PRC citizens and B, H, and N shares can only be issued to, and traded among, foreign investors. The paper examines the impact of the initial listing of B-share issues on the prices of already listed A shares. Our analyses test the joint characteristics of market segmentation and seasoned equity offerings. We find that the abnormal returns on A-share companies that also offer B shares are significantly negative, a result consistent with the hypothesis that the demand curve for equity shares is downward sloping. Interestingly, these negative abnormal returns can be explained by our proxies for the investor recognition theory of Merton (1987) and the liquidity theory of Amihud and Mendelson (1986).

DOI

10.1016/S0927-538X(98)00015-8

Print ISSN

0927538X

Publisher Statement

Copyright © 1998 Elsevier Science B.V.

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Poon, W. P. H., Firth, M., & Fung, H.-G. (1998). Asset pricing in segmented capital markets: Preliminary evidence from China-domiciled companies. Pacific Basin Finance Journal, 6(3/4), 307-319. doi: 10.1016/S0927-538X(98)00015-8