Ultimate ownership, crash risk, and split share structure reform in China

Publication Title

Journal of Banking and Finance

ISSN

3784266

Document Type

Article

Abstract

This study investigates the relationship between ultimate ownership and stock price crash risk for Chinese firms and the impact on this relationship of the implementation of the split share structure reform, which rendered previously non-tradable shares freely tradable. We find that government-controlled firms, especially local ones, have a significantly higher crash risk than privately controlled firms. After the reform, crash risk of all firms decreases significantly, with a greater risk reduction for privately controlled firms than for government-controlled firms. Further evidence demonstrates that government-controlled firms with stronger political incentives tend to have higher crash risk.

Publication Date

4-1-2020

DOI

10.1016/j.jbankfin.2020.105751

Keywords

Crash risk, Government control, Political connections, Split share structure reform

Department

Department of Finance

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