MAIN FACTORS DETERMINING THE CHINESE B-SHARE PRICE DISCOUNT

摘要

China, like many developing countries, imposes restrictions on the ownership of stocks. A-shares can be purchased and owned only by Chinese citizens whereas B-shares can be purchased and owned by foreign investors and, since 2001, by Chinese citizens who have the requisite foreign currency. This paper examines why Chinese B-shares are traded at substantial discounts relative to A-shares and finds that ownership restrictions have the most influence on the B-share price discount. Non-tradability and illiquidity are the contributory factors for the B-share price discount differentials across firms.