A Study On The Application Of Warrant In The Split Share Structure Reform

From China Securities Regulatory Commission proposed"Guidelines of the State Council for Promoting the Reform and Opening-up and Sustained Development of the Capital Market and the Guidance Opinions on the Split Share Structure Reform of Listed Companies"on May 8th 2005, the listed companies take forward the reform smoothly. In the beginning, the reform is only carried out in the Pilot Companies and the market pays more attention to the Financing and Merging and Acquisitions recently.In this thesis the author has analyzed the relation between ownership structure and corporate performance and get the conclusion that it is urgent to solve the problem of the Split Share Structure of listed companies. On the base of the comparing and analyzing of the principles and styles of Consideration, the study focus on the warrant, refer to securities giving the holder a right to subscribe to a underlying securities at a given price and from a certain date. Then we introduce the risk hedging strategies, the pricing and the advantages of warrant in the reform. Meanwhile, we realize the problems in warrant consideration and propose several suggestions.There are four chapters in the study:Chapter One introduces the purpose, important conception and the innovation. Split Share Structure of listed companies is one of the most important distinguishing features in the capital market of China. The tradable and non-tradable shareholders reflect dissimilarly towards the reform. Numerous solutions confused both individual investors and structural investors. This study focuses on the relation between dual-class stocks and the performance of companies. We apply the Return of Equity (ROE) and R instead for Tobin's Q as the indicators to describe the corporate performance. Pricing of the warrant may put forward a challenge for classical Black-Scholes formula. In reality, warrant holders, like option holders, may elect to exercise early if the underlying stock pays sufficiently large dividends. An additional problem in warrant pricing is the companies tend to extend the expiration date if an"out-of-the-money"expiration to warrant is imminent.Chapter Two reviews the Split Share Structure Reform and process of the...