An Empirical Study On Capital Re-organization And Semi-strong Market Efficiency In China

Since the publication of The Behavior of Stock Market Price by Professor Fama Eugene of Chicago University in 1965, the theory of Efficient Market Hypothesis (EMH) has been broadly tested and aroused heated arguments. Practically, Event Study is the common approach to test whether the market has gained a semi-strong efficiency. In this thesis, I try to test whether the China's stock market has been a semi-strong efficient one by sampling 200 firms announcing action plans of capital re-organization, and put forward proposals on the asset restructuring in China's stock market as well.This thesis is composed of five chapters. The first chapter gives a brief introduction on the theory of EMH and its relative sample studies. In the second chapter, I introduce the theory of capital re-organization and its impact on the values of firm with the samples. The third chapter is about the selection of samples and research methodology, and the fourth and fifth ones, the key part of this thesis, tell the result of tests, my analysis and conclusion, and its implications.My study in this thesis comes to the following conclusion: 1. As far as the effect of capital re-organizing announcement is concerned, the efficiency of China's stock market is unstable with characteristics of new markets, sometimes effective and sometimes not. 2. To view from the sequence of time, investors were optimistic at first, cautious later and pessimistic at last, about the capital re-organization. 3. After the enforcement of Security Law, the fluctuation of China's stock market has obviously eased. It shows that the enforcement of Security Law has, to a certain extent, played a role in restraining speculations and helping raise the efficiency. 4. Different modes of capital re-organization have different impacts on the value of a firm. Transfer of shares and sales of assets can help increase the value of a firm, while replacement of assets has no obvious impact and purchase of assets plays a negative role.To further improve China's stock market and its efficiency, I suggest that we may start from establishing and perfecting market rules, strengthening supervision, as well as helping improve the quality of the market participants and update their conception.