Theory Discussion On Non-Tradable Shares And Empirical Studies On Consideration

Non-tradable shares structure was a special arrangement due to history and our unique capital market structure. Under the special arrangement, same shares owned different price and rights, besetting China's long-term development of capital markets and the development of listed companies. Excessive concentration of state-owned shares in the securities market in our country seriously affected the efficiency and the optimal allocation of resources in scientific management structure of listed companies to establish.From the point of guiding all listed companies to establish scientific corporate governance structure, experts and scholars suggested proposals to solve the systematic problem under a large amount of research. The state department and securities commission tried several times by setting experiment sites and finally determined the form and requirements of the reform.On Apr.29th, 2005, the promulgation of "Notices relating to the experiment sites of reform on non-tradable shares of listed companies" stands for the beginning of the reform, which suggested listed companies pay cash or shares as consideration to cover tradable-shareholders' loss, and by the mean time there shares were permitted to trade in the secondary market.Due to the differences on the fundamental condition among listed companies, consideration paid to tradable-shares shareholders differs much from each. In addition, non-tradable shares reform could be seen as a re-allocation or restructure of listed companies' property rights, which will also result in re-allocation of resources in the secondary market, together with games between non-tradable share shareholders and tradable share shareholders.This article tries to make a systematic summarization of the on non-tradable reform, and perform empirical studies on factors which would influence the level of consideration, and then develop a simple model to evaluate the level of consideration.