Stock Liquidity and the Pricing of Earnings: A Comparison of China’s Floating and Non-floating Shares

The reform to convert non-floating shares to floating in China provides a setting in which shares are subject to different liquidity constraint. We show that the severity of this constraint is inversely related to the extent to which earnings information is reflected in the share prices. Specificall...

وصف كامل

محفوظ في:
التفاصيل البيبلوغرافية
المؤلفون الرئيسيون: WANG, Jiwei, Chen, Kevin, Yuan, Hongqi
التنسيق: text
اللغة:English
منشور في: Institutional Knowledge at Singapore Management University 2014
الموضوعات:
الوصول للمادة أونلاين:https://ink.library.smu.edu.sg/soa_research/1187
https://ink.library.smu.edu.sg/context/soa_research/article/2186/viewcontent/lou_wang_yuan_emft_final.pdf
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المؤسسة: Singapore Management University
اللغة: English
الوصف
الملخص:The reform to convert non-floating shares to floating in China provides a setting in which shares are subject to different liquidity constraint. We show that the severity of this constraint is inversely related to the extent to which earnings information is reflected in the share prices. Specifically, before the reform, the transfer prices of non-floating shares reflect much less earnings information than the market prices of floating shares. After the reform, however, both types of transfer reflect more earnings information, although the weights are still less than that found in the market prices. Thus, China's unique setting shows that share liquidity affects the way earnings are priced in stock.