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

Hin Sang Tong, Wayne W. Yu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

21 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)125-147
Number of pages23
JournalJournal of International Money and Finance
Volume31
Issue number2
DOIs
Publication statusPublished - 1 Mar 2012

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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