Research On Non Tradable Shares Reform Increasing The Value Of Listed Companies

On 29 April 2005, China Securities Regulatory Commission (the "CSRC") issued the Notice in relation to the conversion of unlisted shares into listed shares on a trial basis, which signals the start of non tradable shares(NTS) reform and also become the turning point of a new substantial rally (increased by 3 times)for the Chinese securities market performance. Whether the NTS reform has really improved the value of companies? what is the rational for such improvement ? These questions are the main issues for this dissertation to explore.This dissertation consists of 10 chapters. In the first chapter, we clarify the study method exerted and structure for this paper. It is suggested that NTS reforms have changed two intrinsic elements and two extrinsic elements which affecting the companies value respectively. The so called 2 intrinsic elements refers to majority shareholder's behavior and management performance assessment scheme ,and 2 extrinsic elements refer to merger and acquisition and liquidity of securities market.We also take the empirical study method in addition to the theoretical analysis in this paper to demonstrate the impact of NTS reform on those factors .In The second chapters of this paper , we introduce the background of split shares and NTS reform in Chinese securities market.The third chapter has described the concept of split shares and NTS reform ,and then turn to analyzes various NTS reform schemes and the compensation adequacy.In the fourth chapter, we study the behavior difference of majority shareholders before and after NTS reform and corresponding impact on the company value. It is found that NTS reform significantly improves the majority shareholder's supervision initiative, reduce the chance of misappropriation of listed companies property by majority shareholders through various means, and therefore cut down the agency cost and improve the company value.In the fifth chapter, we analyze the changes in respect of management performance assessment methods used before and after NTS reform. Our analysis shows that the management has more initiative and inspiration to exert their function when the evaluation and encouragement have been based on the share prices rather than profit.Chapter six describes the alteration of merger and acquisition market before and after NTS reform and its impact on the companies value accordingly. It is concluded that merger and acquisition market will become more and more effective and efficient in the after NTS reform era, majority shareholder and management are much more motivated to enhance the company fundamentals. Chapter seven studies the liquidity variation before and after NTS reform .we find that the market liquidity has been substantially improved and therefore the shares are priced more efficiently and reasonably.In chapter 8, we examine and analyze the small cap listed companies from an empirical point of view . The result shows NTS reform has enhanced the market liquidity to a great extent and improved the company values accordingly.Chapter 9 has reached the same conclusion that NTS reform had substantially improved the companies value from the angle of new system economics. It is shown that NTS reform ,as a system innovation, has increased the capital market efficiency in term of resources allocation function. Needless to say ,system innovation is the driven force of the capital market development and it is important for us to build up environment friendly to the capital market innovation.We summarize the conclusion and provide some thoughts on the future in the chapter 10.Study the impact of NTS reform on the companies value in a systematical way is the unique aspects of this paper. Generally speaking, this paper has following aspects:1. we use model analyzing the changes of majority shareholders'behavior after NTS reform and its impact on the companies value for the first time.2. we use model analyzing the changes of merger and acquisition market after NTS reform and its impact on the companies value for the first time.3. We analyze the alteration of liquidity in respect of securities markets and its ensuing impact on the companies value for the first time with model .4. we have examined the impact of NTS reform on the companies value from an empirical point of view for the first time.Overall, we have set up a theoretical system in relation to improvements of companies value , including factors such as majority shareholder behavior pattern, management performance assessment method ,merger and acquisition market and securities market liquidity. This paper not only contributes certain thoughts to the current companies value theory ,but also proves the necessity and importance of NTS reform in Chinese securities market through empirical analysis. Hopefully this paper can shed some light on the theoretical study and practice of NTS reform.