The Empirical Analysis Based Panel Data Of Price Difference Between A Share And B Share

Firms often issue different types of equity to discriminate between different investors. In China, firms are required to discriminate between domestic and foreign investors to ensure that ownership remains under Chinese control. Domestic investors can only buy A shares and foreign investors can only buy B shares. The shares are identical in terms of voting power and dividend claims. Due to the existing regulations, the amount of outstanding B shares is always smaller, so foreign investors are forced to be minority shareholders. The outcome is that the equity of the same firm is traded at the same time, at the same exchange, but by two different investor groups and at quite different prices. Typically, A shares trade at a premium over B shares. Moreover, the premium is not constant.Despite the contribution of B share stock market to Chinese economy, but the problem of price difference has already become the...