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
Citation
FANG, Lou; WANG, Jiwei; and YUAN, Hongqi. Stock Liquidity and the Pricing of Earnings: A Comparison of China’s Floating and Non-floating Shares. (2013). Emerging Markets Finance and Trade. 50, (3), 140-157.
Available at: https://ink.library.smu.edu.sg/soa_research/1123
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2753/REE1540-496X5003S308