Date of Award


Degree Type


Degree Name

Master of Philosophy (MPHIL)


Finance and Insurance

First Advisor

Prof. ZHANG, Yuanyuan


The coexistence of tradable and non-tradable shares in Chinese firms has caused severe agency problems and has been the subject of much criticism. In 2005, the Chinese Securities Regulatory Commission launched a reform to eliminate the dual-class share structure and convert non-tradable shares into tradable shares. My thesis examines how the Split Share Structure Reform in China affects the level of information asymmetry of listed firms. The regression results show that the firm-level information asymmetry, measured by the probability of informed trading (PIN), is positively associated to the firm’s proportion of non-tradable shares before the reform, and the PIN decreases significantly after the reform. This is so because the reform reduces the agency costs of firms and increases stock market liquidity. I further document that the reform’s effects on PIN are more pronounced for the firms whose non-tradable shares are more likely to be traded after the reform, the firms that experience a significant enhancement in blockholders’ threat to exit and non-SOEs. The liquidity shock induced by the reform also increases the intensities of informed trading and uninformed trading in the market and the magnitudes of the influences are larger for the latter than the former. My thesis sheds light on the consequences of the reform of firm ownership structure in China and shows that reducing information asymmetry is a channel through which the reform helps improve firm performance. The results of my study provide policy implications for future reforms in developing financial markets.

Recommended Citation

Yuan, T. (2015). Information asymmetry, agency cost and stock liquidity: Evidence from the split share structure reform in China (Master's thesis, Lingnan University, Hong Kong). Retrieved from