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Is the Equity Market Really Developed in the People's Republic of China?

dc.contributor.authorSayuri Shirai
dc.description.abstractSince two domestic stock exchanges were established in the Peoples Republic of China (PRC) in the early 1990s, equity market growth has been remarkable. Nevertheless, the closer scrutiny reveals that the market is highly segmented and distorted. This paper assesses the state of the PRCs equity market development by focusing on its following three main functions(1) a source of stable financing for firms investment, (2) improving firms corporate governance and performance, and (3) signaling information on issuers to public investors. It concludes that the equity market has so far failed either to provide stable sources of finance for firms investment or improve their performance (indeed, firms performance has even deteriorated following initial public offerings). Moreover, while firms fundamentals have been reflected to a large extent in stock prices, suggesting that there is at least some signaling role, their co-movement has declined in recent years despite clampdowns against accounting malpractices. Indeed, it is likely that co-movement between stock prices and earnings per share has encouraged accounting manipulations to bump up stock prices. These findings suggest that PRCs equity market remains underdeveloped. If the Government is to privatize listed SOEs, the governance needs to introduce measures to prevent asset striping undertaken by managers of SOEs. Moreover, if the Government needs to develop a sound equity market, it must urgently improve the informational, legal, and judicial infrastructure, and educate public investors.
dc.publisherAsian Development Bank Institute
dc.rightsCC BY 3.0 IGO
dc.titleIs the Equity Market Really Developed in the People's Republic of China?
dc.typeWorking Papers
dc.subject.expertTrade Finance
dc.subject.expertRural Finance
dc.subject.expertRegional Development Finance
dc.subject.expertPublic Financial Management
dc.subject.expertPublic Finance
dc.subject.expertInternational Finance
dc.subject.expertIntergovernmental Finance
dc.subject.expertFinancial System
dc.subject.expertFinancial Flows
dc.subject.expertFinancial Assets
dc.subject.expertFinance And Trade
dc.subject.expertTrade Finance
dc.subject.adbLocal Finance
dc.subject.adbInternational Monetary Relations
dc.subject.adbLocal Finance
dc.subject.adbCapital Market
dc.subject.adbfinancial statistics
dc.subject.adbForeign trade
dc.subject.naturalMunicipal government
dc.subject.naturalMetropolitan government
dc.subject.naturalInternational banks and banking
dc.subject.naturalCapital movements
dc.subject.naturalCentral banks and banking
dc.subject.naturalBills of exchange
dc.subject.naturalBanks and banking
dc.subject.naturalStock exchanges
dc.subject.naturalBalance of trade
dc.title.seriesResearch Paper Series
dc.contributor.imprintAsian Development Bank
oar.adminregionEast Asia Region
oar.countryPeople's Republic of China
oar.authorShirai, Sayuri

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  • ADBI Research Paper Series
    The Asian Development Bank Institute (ADBI) research paper series disseminate selected work in progress to facilitate an exchange of ideas within academic and policy communities. An objective of the series is to circulate primary findings promptly, regardless of the degree of finish. ADBI’s activities are guided by its three strategic priority themes of inclusive and sustainable growth, regional cooperation and integration, and governance for policies and institutions.

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