Are future capital gain opportunities important in the market for corporate control? Evidence from China

Liping Dong, Konari Uchida, Xiaohong Hou

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Stock prices of Chinese target companies react positively to the announcement of block trades. Such a reaction is greater when publicly tradable shares (PTS) are transferred than when bidders obtain nonpublicly tradable shares (NPTS). PTS transactions also perform significantly better in the long run than do NPTS transactions. These results suggest that stock liquidity matters for corporate control rights transactions to improve target firms' management. We also find that bidders appoint a new CEO or chief director in more than half of the cases of block trades. Better stock price performance for PTS transactions comes mainly from targets with high Tobin's Q. Capital gain opportunities are likely to motivate bidders to expand target firms' businesses for capital gains.

Original languageEnglish
JournalJournal of Corporate Finance
DOIs
Publication statusAccepted/In press - Jan 1 2017

Fingerprint

Market for corporate control
China
Capital gains
Block trades
Tobin's Q
Corporate control
Control rights
Stock prices
Announcement
Liquidity
Chief executive officer
Stock price performance

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

Are future capital gain opportunities important in the market for corporate control? Evidence from China. / Dong, Liping; Uchida, Konari; Hou, Xiaohong.

In: Journal of Corporate Finance, 01.01.2017.

Research output: Contribution to journalArticle

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