An Empirical Study On The Market Effect And Price Pressure Of The Split Share Structure Reform

Split-share is a special feature of china's stock market, and the split share structure reform is a unique event of this market. This paper based on the theoretical analysis, and studied the market reaction of the split share reform, then analyzed the factors which affect the CAR, discussed the price pressure about the split share reform at last.We find that the AAR decreased after the execution day of the reform plan of the split share structure, which means the stock price decreased heavily during these days. The CAR turned to be positive but decreased before the event happened, and after the event happened the CAR turned to be negative. That means the market has excessive reaction about the reform plan.This paper also analyzed the factors which affect the reaction of AAR, and we find that the percentage of bonus shares in the reform plan, the percentage of tradable shares, the ROE and the PB to the reform plan are the main factors. Among these factors, the percentage of bonus shares, the ROE have significant positive impacts on the reaction of the CAR, while the percentage of tradable shares, the PB have significant negative impacts on the reaction. We also find that the amounts of the stock market will increase three times based on present amounts, the price will face heavily decrease during the three times.Lastly, below are the policy suggestions provide by this paper according to the study conclusions, which consists of improving the transparency of trading information to enhance the market efficiency, guiding the reasonable action of investors to avoid the attack about the market, providing various trade methods to the non-tradable shares, boosting the quality of investors to consolidate the foundation of the stock market, and establishing favorable atmosphere of the market to facilitate the reform.