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Privatization and non-tradable stock reform in China: The case of Valin Steel Tube & Wire Co., Ltd

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  • Guo, Enyang
  • Keown, Arthur J.
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    Abstract

    While China had been vigorously pursuing economic reform since the late 1980s, it wasn't until the 2005-2006 time period that non-tradable stock reform took place. The case of Hunan Valin Steel provides a rich look inside about the dynamics of the non-tradable share reform in China, and demonstrates the impact of good financial design helping the company to turn aside the financial distress, while minimizing costs to benefit the stockholders. Moreover, this case provides an illustration of the challenges posed by agency problems in China, with conflicted interests between tradable shareholders (public investors) on one hand and non-tradable shareholders (governments and state-owned enterprises) on the other. Not only does the split share structure result in conflicted interests and asymmetric information between managers and owners, but it also made it difficult to establish effective corporate governance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 20 (2009)
    Issue (Month): 2 ()
    Pages: 191-208

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    Handle: RePEc:eee:glofin:v:20:y:2009:i:2:p:191-208

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    Web page: http://www.elsevier.com/locate/inca/620162

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    Keywords: Ownership structure Non-tradable stock reform Chinese equity market Split share structure;

    References

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    1. Kam C. Chan & Louis T. W. Cheng & Joseph K. W. Fung, 2001. "Ownership Restrictions and Stock-Price Behavior in China," Chinese Economy, M.E. Sharpe, Inc., vol. 34(1), pages 29-48, January.
    2. Chien-Liang Chiu & Mingchih Lee & Chun-Da Chen, 2005. "Removal of an investment restriction: the 'B' share experience from China's stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 15(4), pages 273-285.
    3. Xiaonian Xu & Yan Wang, 1997. "Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies," Policy Research Working Paper Series 1794, The World Bank.
    4. Bernardo Bortolotti & Andrea Beltratti, 2006. "The Nontradable Share Reform in the Chinese Stock Market," Working Papers 2006.131, Fondazione Eni Enrico Mattei.
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    Cited by:
    1. French, Joseph J. & Naka, Atsuyuki, 2013. "Dynamic relationships among equity flows, equity returns and dividends: Behavior of U.S. investors in China and India," Global Finance Journal, Elsevier, vol. 24(1), pages 13-29.

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