The impact of state ownership on share price informativeness: The case of the Split Share Structure Reform in China

This study examines the impact of state ownership on share price informativeness using the unique setting of the Split Share Structure Reform in China. This reform abolishes the trading restriction on shares held mainly by state shareholders. In doing so, it renders state shareholders' wealth more sensitive to share price movements and decreases their conflict of interests with private shareholders. This change is expected to strengthen the corporate governance incentives of state shareholders and reduce the information asymmetry in Chinese listed firms. This prediction is confirmed through empirical evidence of increased share price informativeness among firms that are more sensitive to the impact of this reform, i.e. those with more state ownership or restricted shares. These findings imply that this reform benefits the information environment and minority shareholders in the Chinese stock market.