The Research On Evaluating Liquidity Discount Rate Of Restricted Stock

There are a lot of restricted stocks in the Chinese Stock Markets. The essential difference between the restricted stock and tradable share is that the former lack of liquidity in restricted period. In the practice of appraisal, It requires for restricted stock to be valued because we need to evaluate enterprise value with restricted stock. Furthermore, when buyers and sellers reach agreement for sale or auction on restricted stock we have the demand of evaluation. But it is easy for certified public valuer to overlook the liquidity of restricted stock and can’t reasonably reflect its value. This article is intended to be more scientific and adopt rational approach to evaluate the restricted stock.The paper bases on the theory of liquidity discount of restricted stock, using the value of a put option to measure the discount of restricted stock. According to the characteristics of Longstaff option model and Finnerty option model, combined with the data of 85 listed companies in information and technology industry, then obtaining an amended option model and using it to evaluate liquidity discount rate of restricted stock (information and technology industry). The following conclusions:the restricted period and stock volatility are the major factor affecting liquidity discount rate, the longer the restricted period, the greater the liquidity discount rate, the greater the volatility, the greater the liquidity discount rate; In other conditions remain unchanged, when the restricted period increased by 10 percent, the liquidity discount rate of restricted stock increase 6.63 percent, when volatility increased by 10 percent, the liquidity discount rate of restricted stock increase 10.27 percent; in the same restricted period, the liquidity discount rate of restricted stock in Growth Enterprises Market is higher than in Mainboard by 3.5 percentage points.The possible innovations:(1)the innovation of research object. Scholars did a lot of studies on non-tradable liquidity discount rate, and less for restricted shares of listed companies. (2)the innovation of research methods. Using sophisticated option model to evaluate liquidity discount rate of restricted stock objectively, at the same time, modifying the option model, obtaining a suitable option model to measure the liquidity discount rate of restricted stock about information and technology industry.