Publication Type
Journal Article
Publication Date
1-2014
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
Publication
Emerging Markets Finance and Trade
ISSN
1540-496X
Citation
WANG, Jiwei; Chen, Kevin; and Yuan, Hongqi.
Stock Liquidity and the Pricing of Earnings: A Comparison of China’s Floating and Non-floating Shares. (2014). Emerging Markets Finance and Trade.
Available at: https://ink.library.smu.edu.sg/soa_research/1187
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This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.