Search results

This paper attempts to explore the interrelationships between the split-share structure reform and privatization processes in light of the interplay between the listing announcements of the non-traditional shares of the Chinese firms within the steel industry and market reaction to these listed shares, as well as to analyze the value gained by the firms due to the privatization processes.

The paper examines market reaction to the listing announcements of non-traditional shares as traditional shares by employing event-study methodology. To determine the success of privatization process and value creation to the firm, the paper utilizes multivariate analysis.

The exogenous factors emphasized in a topographical order, explicitly profitability, efficiency, and leverage, are related to the privatization processes and split-share structure reform that impact the market. The study supports that market reacts positively to the listing announcements of non-traditional shares. Being listed improves value to the firm.

The limitation of this study is the lack of data on country, industry, and firm factors; and this study merely relates to one specific industry and one country.

The paper fills a gap in the literature by articulating the impact of privatization and split-share structure reform on both market reaction and firm value. It focuses on the impact of a dynamic process rather than the impact of a static constituent on market reaction and firm value, as the previous studies have been concentrating on. The research shows that there is an accelerated privatization process of state-owned firms in Chinese steel industry and their integration in capital markets.

The purpose of this paper is to investigate the effect of corporate governance and ownership structures on earnings quality in China both prior and subsequent to two important corporate reforms: the code of corporate governance (CCG) in 2002 and the split share structure reform (SSR) in 2005.

This study utilises informativeness of earnings (earnings response coefficient), conditional accounting conservatism and managerial discretionary accruals to assess earnings quality using 12,267 firm-year observations over 11 years from 2000 to 2010. Further, two dummy variables for measuring the changes of CCG and SSR are employed to estimate the effects of CCG and SSR reforms on earnings quality via OLS regression.

This study finds that the promulgation of the CCG in 2002 has had a positive impact, but the SSR reform in 2005 has had little effect on listed firms’ earnings quality in China. These results hold good after controlling for a number of ownership, governance and other variables and estimating models with multiple measures of earnings’ quality.

Future research could focus on how western style corporate governance mechanisms have been constrained by the old management systems and governmental dominated ownership structures in Chinese listed firms. The conclusion is that simply coping Western corporate governance model is not suitable for every country.

The results will assist Chinese regulators in improving reporting quality, ownership structure and governance mechanisms in China. The results will help international investors better understand quality of financial information in China.

This is the first to our knowledge that addresses the effects of major governance and ownership reforms together on accounting earnings quality and, thus, makes a significant contribution on understanding the effect of regulatory reforms on improving earnings quality. In doing so, it also indirectly assesses the effectiveness of western-style corporate governance mechanisms introduced in China.