Size, book/market ratio and risk factor returns: evidence from China A‐share market

Chen, Jianguo; Kan, Kwong Leong; Anderson, Hamish D.

doi:10.1108/03074350710760304

Cited by 16 publications

(9 citation statements)

References 17 publications

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“…High MB is commonly associated with dynamism and promise; hence the risk (Fama and French, ). In the case of China, there is complementary evidence that a high MB is associated with growth as well as the risk of failure (Chen et al., ). An equity issue can fuel latent growth and the market's appraisal of a financing event will reflect this insofar as it is perceptible and credible.…”

Section: Resultsmentioning

confidence: 99%

Market Reaction to Seasoned Offerings in China

Liu¹,

Akbar²,

Shah³

et al. 2016

Business Fin & Account

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This study examines stock market reaction to the announcement of various forms of seasoned issues in China. Our empirical evidence demonstrates that market reactions differ in ways that suggest a difference between management's internal assessment and the market's assessment of the stock price. The market responds unfavourably to the announcement, notably in the case of rights issues and also with regard to open offers. Private placements experience an unfavourable pre-announcement reaction, which contrasts with the favourable reaction after the event. Convertible bond issues generate positive excess returns consistent with the market's confidence that they can help to align management and shareholders' interests. Further investigation shows that market reaction is related to factors specific to the issuer and issue by reference to the period immediately surrounding the issue. Specifically, ownership concentration, agency matters connected with equity offerings, investor protection connected with fund allocation and security pricing, and the influence of powerful moneyed interests together provide an instructive insight into market reaction. Institutional inefficiency pertaining to underwriting, auditing, analysts' forecasts and credit ratings are found to have a weak association with market price, consistent with due public scepticism concerning management and their gatekeepers.

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Section: Resultsmentioning

confidence: 99%

Market Reaction to Seasoned Offerings in China

Liu¹,

Akbar²,

Shah³

et al. 2016

Business Fin & Account

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“…In model 1, we control for company and reform characteristics (Chen et al. , 2007) such as state ownership ( SOEs_DUM ), size ( LNTA ), company performance ( P / B ) 6 and leverage ( DTA ).…”

Section: Methodsmentioning

confidence: 99%

Does consideration matter to China’s split share structure reform?

Balatbat

Czernkowski

2011

Accounting & Finance

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We investigate the share market response to China's split share structure reform and find average negative daily return around the government announcement on 29 April 2005. However, there is a turnaround at individual companies' decision to implement the reform where we find positive and significant average daily return, contingent on the type of consideration. We attribute this change in market sentiment to the company's announcement that the reform will involve the payment of consideration to holders of tradable A-shares. Our results also show that holders of tradable A-shares earn significant abnormal daily returns when companies propose to pay in cash or warrants or combine any of these payment methods with bonus shares.

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“…Consistent with our results, Wang and Xu () and Hilliard and Zhang () also find no value effect in the Chinese stock market. On another hand, some of the existing literature document significant value effect, including Cakici et al (), Chen et al (), Carpenter et al (), Cakici et al (), Cheung et al (), Wang and Di Iorio (), Wong et al (), Wu (), Eun and Huang (), Huang and Yang (), Chen et al (), and Morelli ().…”

Section: Robustnessmentioning

confidence: 99%

Fama–French in China: Size and Value Factors in Chinese Stock Returns

Chen

Shao

et al. 2018

Int Rev Finance

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We investigate the size and value factors in the cross-section of returns for the Chinese stock market. We find a significant size effect but no robust value effect. A zero-cost small-minus-big (SMB) portfolio earns an average premium of 0.61% per month, which is statistically significant with a t-value of 2.89 and economically important. In contrast, neither the market portfolio nor the zero-cost high-minus-low (HML) portfolio has average premiums that are statistically different from zero. In both time-series regressions and Fama-MacBeth cross-sectional tests, SMB represents the strongest factor in explaining the cross-section of Chinese stock returns. Our results contradict several existing studies which document a value effect. We show that this difference comes from the extreme values in a few months in the early years of the market with a small number of stocks and high volatility. Their impact becomes insignificant with a longer sample and proper volatility adjustment.

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Size, book/market ratio and risk factor returns: evidence from China A‐share market

Cited by 16 publications

References 17 publications

Market Reaction to Seasoned Offerings in China

Market Reaction to Seasoned Offerings in China

Does consideration matter to China’s split share structure reform?

Fama–French in China: Size and Value Factors in Chinese Stock Returns

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