The Impact Of Special Treatment On A Shares: An Event Study Approach

Stock price is influenced by various information in the market. As an emerging market, China's stock market has its own trading regulation and environment which do have big influence to security price. The special treatment system on listed shares is a unique trading system of China, and it was designed to mark the shares which were in abnormal situations. What are the reactions of stock price to these events? How to react on the different information? What degree of the reaction? What does the reaction mean? How to explain and analyze these problems? This paper focuses on these problems.The sample companies are those which have been special treated during the period of 1998-2005. Using event study method, this paper tests the reaction of stock price on special treatment event and the profit estimation made by listing companies.This paper is composed of four parts.The first part introduces the special treatment system and the market situation, and points out the aim and ways of this study. The second part gives an overview of event study on stock price. The third part is the core of this paper. It analyzes the effect of special treatment event and profit estimation information on the stock price. The fourth part is another core of this paper. It's the conclusion of this event study and suggestions on the problems of the information giving out.From the analysis of the related datum of china's stock market, there are seven conclusions1) ST shares do have significant negative reactions to special treatment event and losses estimation information.2) ST shares do have significant positive reactions to elimination of special treatment event and profits estimation information.3) There are problems of information giving out in China's stock market.4) The returns of ST shares in event periods vary from year and year.5) The returns of ST shares in event periods is to some extent connected with the market index.6) There is a big difference in returns of ST shares in event periods between Shanghai Stocks Exchange and Shengzhen Stocks Exchange. The returns of ST shares in Shengzhen Stocks Exchange have bigger validity.7) The cumulative abnormal returns of ST shares are significant different during the events of profits estimation and losses estimation.