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Title: How minority shareholders are affected : reverse stock splits in Hong Kong and related party transactions in China
Other Titles: Cong Xianggang gong si gu piao bing gu ji Zhongguo gong si guan lian jiao yi kan xiao gu dong li yi de bian hua
Authors: Jing, Lihua (井麗華)
Department: Dept. of Economics and Finance
Degree: Doctor of Philosophy
Issue Date: 2004
Publisher: City University of Hong Kong
Subjects: Minority stockholders -- China -- Hong Kong
Related party transaction -- China
Stock splitting -- China -- Hong Kong
Notes: CityU Call Number: HG5802.J56 2004
Includes bibliographical references (leaves 132-139)
Thesis (Ph.D.)--City University of Hong Kong, 2004
vi, 139 leaves : ill. ; 30 cm.
Type: Thesis
Abstract: This dissertation studies how minority shareholders are affected under particular company events—reverse stock splits in Kong Hong and related party transactions in China. My dissertation comprises two papers. The first paper examines a sample of reverse stock splits in Hong Kong from 1991 to 2001. The results show that reverse split announcements are associated with a significant negative market response. I also find that these firms significantly under-perform their peers before and after the reverse-split announcement. However, a reverse-split enhances the liquidity of the stock and reduces transaction costs. My study also shows there is no evidence that firm managers use the reverse stock splits to adjust stock price to a preferred price range. As a result, the findings suggest investors should liquidate their position in firms that announce a reverse stock split. The second paper of my dissertation examines the related party transactions in China during 2000-2001. I examine in details the mechanism through which listed company’s minority shareholders are expropriated. There is no significant excess return around the announcement. However, firms undertaking related party transaction experience worse firm performance and stock performance during 12-month post-transaction period, compared to firms that do not undertake related party transactions. I further explore the effect of ownership structure, corporate governance, and information disclosure variables on related party transactions. The logit model results show that when the state ownership is relatively low, the SOE parents are likely to expropriate their listed subsidiaries; when the state ownership is high, the SOE parents, however, are likely to provide financial support to their listed subsidiaries when needed. I find the proportion of independent directors, a corporate governance variable, is significant in explaining the likelihood of undertaking related party transactions. Overall, there is little evidence that information disclosure variables affect the likelihood of undertaking any type of related party transaction.
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