Research On The Price Disparity Of Chinese Cross-listed Stocks

As the rise of productivity,the advance of science and technology,and the development of economic globalization,the development of financial globalization has increased.It has strengthened the economic trade relationship between developed and developing nations and has promoted the optimum allocation of the global funds.On the other side,the coordination and competition on financial policy and financial business among different countries have made the world of a whole.As the carrier of economic activities,the globalization of financial market is the key to the globalization of financial business.The market segmentation caused by the financial regulation has limited the capital flows.As the improvement of developed countries and the development of developing countries,and the openness of capital market in developed and developing nations,the globalization of stock markets has deepened ever since.In the background of financial globalization,a growing number of companies has chosen overseas listing to bring greater financial openness.What's more,overseas listing has also helped the integration of global financial markets and accelerate the capital flow.In recent years,a growing number of Chinese companies has chosen to list on Hong Kong stock market,the price disparity between A-shares and H-shares has attracted more and more attention.Based on previous studies,the dissertation examines companies that issue both Ashares in mainland China stock market and H-shares in Hong Kong stock market,while Hshares are available to Hong Kong and international investors.We explore the impact of splitshare structure reform on A-shares and H-shares,analyze the co-movement of cross-listed securities and the markets,and try to find the empirical evidence relating to sources of H-share discounts.We also give comments on the development of Chinese stock market based on the conclusion of this dissertation.First,this dissertation reviews the literature on the reasons of dual listing and the influencing factors of price disparity of cross-listed companies.We explore the external and internal factors that affect the companies' choice to list abroad.We examine the differential demand hypothesis,differential liquidity hypothesis,asymmetric information hypothesis and differential risk hypothesis,and elaborate their importance on the price disparity of cross-listed companies.Second,this dissertation gives the definition of cross-listed companies and introduces the historical background of the security market,especially A-shares and H-shares stock markets.As the development of stock market,the number of listed companies has increased and the total market capitalization,the trading volume and turnover have added up quickly.Optimization of financial resources allocation becomes the motivation to promoting the continuous improvement and perfection of the stock market.During the course of our stock market becoming perfect,the Chinese stock market has played an important role in the development of economy,especially in the investment and financing areas.We examine Chinese companies that issue both A-shares in mainland China and H-shares in Hong Kong.Since Hong Kong stock market has more advantages such as good law environment and economic system,low costs and simple listing procedure,more and more Chinese companies prefer to list in Hong Kong.The Tsingtao Brewery China's IPO was issued in Hong Kong in 15 July,1993.It opened the prologue that domestic companies go to Hong Kong stock market listing.On national policies,the number of companies issues H-shares went back to mainland China stock market has increasing and vice versa.Third,we discuss the split share structure reform in details and emphasize its importance.What should be noticed is that split share structure reform has played an important role in price disparity of cross-listed companies.We examine the relationship between split share structure reform and A-shares(H-shares).We discuss about different periods of the split share structure reform in details and adopt event study to analyze the abnormal return and cumulative abnormal return around the second resumption day and the first announcement of lockup expiration.We find that,for A-shares,on the second resumption day,the abnormal return and cumulative abnormal return are significantly positive,resulting in apparent response to the market.On the first announcement of lockup expiration,they are not significantly positive.For H-shares,before the second resumption day,the market has already reacted positively.But on the first announcement of lockup expiration of A-shares,the market has made a stable reaction.Fourth,we investigate the relationship between A-share returns,H-share returns and the Shanghai(Shenzhen)and Hong Kong stock markets returns.Since firms that issue both A-and H-shares are located in mainland China,we explore the dynamic movements of stock returns and markets.We find that A-shares mainly exhibit significant exposure to domestic market.On the other side,H-shares have been affected by both stock markets,but behave more like Hong Kong stocks.When split share structure reform is considered,A-shares and H-shares behave just like before.What should be noticed is that for some cross-listed companies,the domestic market has more influence on both A-shares and H-shares.Fifth,we adopt panel data to analyze the H-share price discounts.As the increasing of relative supply,relative risk and the decreasing of market capitalization and relative liquidity of Ashares,the price disparity of A-shares and H-shares narrows down.The appreciation of RMB will decrease the price disparity.When we put stages of development of cross-listed companies into consideration,the results are robust.When we consider the split share structure reform,as the number of tradable A-shares increases,the price disparity between A-shares and H-shares narrows down.The results are robust when we consider time effect in our analysis.Last but not the least,different measuring standards of stock prices don't change the above results.Sixth,under the impact of economic globalization,the capital market has grown more mature in China.Domestic stock market and Hong Kong stock market have been closely connected.The market segmentation has alleviated.Based on our conclusion,we should make great efforts to open up the capital markets,widen the investment channel,and improve the information asymmetry and supervision measures.