Title

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

Publication Type

Journal Article

Version

Preprint

Publication Date

10-2013

Abstract

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.

Keywords

Stock Liquidity, Pricing, Earnings, China

Discipline

Accounting | Asian Studies | Portfolio and Security Analysis

Research Areas

Corporate Reporting and Disclosure

Publication

Emerging Markets Finance and Trade

Volume

50

Issue

3

First Page

140

Last Page

157

ISSN

1540-496X

Identifier

10.2753/REE1540-496X5003S308

Publisher

Taylor and Francis

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.