Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market

Empirical Research on Influential Factors about H-share’s Discount

Author ShiFei
Tutor ZhangHeJin
School Southwestern University of Finance and Economics
Course Finance
Keywords Discount of H Shares Panel data unit root test Panel data cointegration test Sectional model Fixed effect variable coefficients model
CLC F832.51
Type Master's thesis
Year 2009
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Despite the unstoppable trend of global economic integration, but a wide range of market segmentation situation still exists in many countries and regions. Due to trade barriers resulting from product market segmentation will make the law of one price does not hold the same capital markets as a result of the investment restrictions and other reasons the stock market segmentation. Observe many emerging market economies in the world, the country's stock market can be found, due to the differences that exist in the trading system and other investors qualifications or market, with a listed company in the listing is issued in different kinds of stocks, or even with a listing of companies in the same listing issue different kinds of stock, its price after excluding the exchange rate impact still differences, the majority of the performance by the foreign investors to participate in the stock price of the investment was significantly higher than that only by domestic investors to participate in the investment stock prices. This phenomenon is called the premium of foreign shares in the stock market segmentation conditions \Abroad have stock market segmentation research began in the 1970s, but the empirical study of the relationship between the stock market segmentation and price differences, as well as lead to price differences in the impact of factors in the late 1980s and early 1990s launched a large-scale. Many scholars to study the phenomenon of foreign shares premium and premium Finland, Thailand, Sweden, Mexico and other countries due to the stock market segmentation influencing factors, which most nations horizontal comparison 1999 Bailey, Chung and Kang, including China An Empirical Study of the 10 countries or regions, including premium phenomenon caused by foreign shares, the stock market segmentation. The study showed that the sample of 10 countries or territories (except China) varying degrees of foreign shares relative stronger than the more developed countries, the degree of foreign shares premium premium phenomenon of domestic shares, emerging market economies, the degree of foreign shares premium, only The presence of foreign shares discount. Chinese company dual listed foreign shares (H-shares and B-shares) relative to domestic shares (A shares) discount phenomenon called China H-share discount mystery and the mystery of the B-share discount international academia. Of China's dual listing the discount foreign shares in the company, the earliest foreign scholars from research B shares relative to the beginning of the A-share discount, there are already a large number of studies of B-share discount the literature, in contrast to the start of the study of the H-share discount late and less empirical research. This article from the impact of foreign shares and domestic shares price difference information asymmetry theory, theory of liquidity differences, differences in the valuation model theory, consider the unique ownership structure of listed companies in China the situation from asymmetric information, liquidity factors, investment by the difference of the investment philosophy, H shares and A shares investors demand elasticity differences, ownership structure features (non-tradable shares in existence), the impact of the equity division reform, and other factors that may affect the H-share discount several angles, design seven explanatory variables explain the H-share discount. In order to ensure the consistency of the sample data, select the last three years (36 months) both A shares and H shares consecutive complete transaction record of 17 AH-share companies as samples, respectively, with two models - sectional regressions model and panel data fixed effects varying coefficient models, seven explanatory variables regression modeling. Ordinary least squares regression, and a variety of test after a cross-sectional regression model, the variable coefficients model with fixed effects panel data unit root test and panel data cointegration test, and after the model set in the form of test after 2 regression after various testing, the following empirical results: (1) to measure the elasticity of demand differences agent variable the RS DR positive correlation with the H-share discount rate, confirmed that China's stock market due to the A-share and H-share investors demand elasticity in the A-share supply is relatively small in the case of A-share investors easily sought after A-share price, the price difference to widen A shares and H shares, H shares discount rate increases. Empirical results with theoretical analysis. (2) measure the capital structure of the non-tradable shares account for a proportion of the total share capital of the listed company the STATE and H shares discount rate DR into a positive correlation, indicating that China's listed companies of non-tradable shares to total equity ratio the greater, the more will affect foreign investors valuation of H shares, resulting in the H shares relative to A shares of the discount rate increase. Empirical results with theoretical analysis. (3) split share structure reform dummy variable DUMMY DR and H-share discount rate is positively correlated with the theoretical analysis of the regression coefficient is negative contrary, not been able to prove that he has the split share reform of listed companies in its H shares relative to The theoretical analysis of the discount rate of the A-share price decline. The empirical results support the theoretical analysis. (4) the company's financial indicators EPS and H-share discount rate has a negative correlation shows that the dual-listed company's earnings per share is indeed one of the factors of concern to foreign investors in investment in the H shares. More earnings per share of listed companies, and its H shares more welcomed by foreign investors, the H-share and A share price difference narrowed, H-shares of the discount rate is also reduced. Empirical results with theoretical analysis. (5) to measure the degree of information asymmetry index AIE H-share discount rate DR is basically a negative correlation. Show that the AIE smaller the (dual listed H shares relative to A shares of the discount rate the greater the greater the degree of information asymmetry). The empirical results are basically consistent with the theoretical analysis. (6) a measure of liquidity differences indicators RTV and H-share discount rate DR is basically negative correlation, indicating that poor fluidity of H shares relative to A shares, foreign investors more reluctant to pay a higher price for the H-shares, spreads widened so that the H shares and A shares, H shares relative to A shares of the discount rate is greater. The empirical results are basically consistent with the theoretical analysis. (7) the proxy variable measure of investors to invest in the concept of difference, the relationship of the ratio of share price volatility RV and H-share discount rate DR uncertain, which show that China's A-share and H-share market in the investor's investment philosophy and market speculative little difference in empirical results do not fully support or refute the theoretical analysis. Seven explanatory factors for this study, the explanatory variables RS STATE, DUMMY, EPS belonging to the cross-sectional regression model to explain the variable AIE, RTV, RV belongs to panel data fixed effects varying coefficient models. After a multiple regression and all kinds of tests, the two models have good fitting degree. Through empirical research, most of these explanatory variables can be recognized as an influential interpretation of the H-share discount factors differ only on behalf of the equity division reform dummy variables DUMMY empirical results with theoretical analysis. In addition, the share price volatility of H shares and A shares used to measure the investors investment philosophy differences RV regression results in the fixed effects model variable coefficients is not clear that there is not enough evidence to support the theoretical analysis, also there is not enough evidence to overthrow the theory Analysis. May be due to the small sample size led to statistical error is also possible that the A-share investors with the H-share investors are significant differences in investment philosophy, reflected in the 17 sample regression results on the performance of nine RV regression coefficient is negative the (nine companies coefficient all have statistically significant), inference is consistent with the theory, while the other eight companies RV regression coefficient is positive (coefficient of six companies with significant statistical) inconsistent with theories postulate. This study draws on the research results at home and abroad on the H-share discount, and also carry out the following four-point innovation: First, this article inspection in the course of the study using a panel data model many econometric literature, reference to foreign panel data model for the measurement of teaching materials, the first complete and correct panel data modeling analysis and regression testing process into H shares on the A-share discount and get a good regression results, relative to previous studies. Speech is the innovative research methods. Second, we design two regression models, a cross-sectional model, cross-sectional regression constant factor of the 17 sample companies. A fixed effects panel data model with variable coefficients, of the 17 samples in the sample of 36 months each time series variable regression. This would solve the problem of the explanatory factors are not uniform in the dimension. Relative to the mix predecessors factors of the constant factors and time series as an explanatory variable regression, do corrections. Third, in the design of the explanatory variables of the regression This article EPS of the company's financial indicators as explanatory variables to examine the the investment rational degree of analysis of the domestic and foreign investors discount the impact of the difference of the areas of focus of the H shares, and the cross-sectional model regression results from the Empirical support EPS significantly. Fourth, this paper samples and sample range select the predecessors different. The sample period for the last three years, a sample of 17 companies selected, and the selected sample period of the previous empirical studies mostly concentrated in around 2006 or even earlier. With the gradual opening up of the Mainland and Hong Kong Closer economic and trade exchanges and the mainland capital market, the price of the A shares and H shares differences need to be tested with a new sample data. Due to a relatively small number of factors affecting the H-share discount is varied, and this article AH shares sample companies, there is a lack of research inevitably need further study and research in the future.

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