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Floating the Nonfloatables in China's Stock Market: Theory and Design

Author

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  • ALAN GUOMING HUANG
  • HUNG-GAY FUNG

Abstract

This study explains the conflict of interest between the majority stockholders, who have nonfloatable shares, and the minority stockholders, who have floatable shares in China's stock market. The growth of the Chinese financial markets is seriously constrained given the market segmentation of the two classes of stocks. This study provides a dynamic valuation model that motivates controlling stockholders to convert their nonfloatable shares to floatable shares and illustrates how a security design is able to float these shares. Issues on how to improve future corporate governance in China are also discussed.

Suggested Citation

  • Alan Guoming Huang & Hung-Gay Fung, 2005. "Floating the Nonfloatables in China's Stock Market: Theory and Design," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(5), pages 6-26, October.
  • Handle: RePEc:mes:emfitr:v:41:y:2005:i:5:p:6-26
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    Cited by:

    1. Xiaoyan Chen, 2017. "Improved corporate governance and Chinese seasoned equity offering announcement effects," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(2), pages 401-428, June.
    2. Xiaoyan Chen & Xin Ling, 2017. "Determinants of Chinese equity financing behaviours: traditional model and the alternatives," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57, pages 69-100, April.

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