China Restricted Circulation Of A-share Valuation Studies

This paper researches the pricing of restricted stock..Generally speaking, the term "restricted stock" is defined as "securities acquired directly or indirectly from the issuer thereof, or from an affiliate of such issuer, in a transaction or chain of transactions not involving any public offering." In practice, because of the IPO issue, the stimulation or compensation plan, the M&A activity, the venture capital or the private equity and the reform of segmentation in share-holder etc.. The restricted stock has extensive existing forms. In practice, investors acquired the mortgage loans, transfer the restricted stock by agreement, and manage the risk from the restricted stock etc., which need to know the value of restricted stocks. So it has a very important theoretical and practical meaning to research the pricing of restricted stocks.Valuation is always one of the most important aspects in financial field. This paper combines the restricted stock with valuation. Based on the research from home and abroad, this paper analyzes the existed valuation model, and acquired new model by analyzing the premise of Longstaff and Finnerty model. We get 119 samples from IPO placement to institutional investor and 415 samples from the reform of segmentation in share-holder, and estimate the price discount of these samples. Furthermore, we also acquire the theoretical price discount of these samples according existed valuation model. Compared the theoretical discount with practical discount, we find the factors which influence the effective and robust of the valuation model.The structure includes: Preface; Chapter 2, we review the method and theory of asset pricing, including the pricing of restricted stock. Chapter 3, we describe the existing forms of restricted stock and overview the restricted stock in U.S.. Chapter 4 and 5, according to the existing valuation model, we estimate the theoretical and practical price discount to the 119 samples from the IPO placement and the 415 samples from the reform of segmentation in share-holder. Chapter 6, we compare the theoretical and practical price discount according to the different valuation models and different category samples. Chapter 7, we analyze the reduction of restricted stock by building the model, and make empirical study to effects of reduction of restricted stock in different category samples.The conclusions are as follows:1. Most of restricted stocks in China are from the restriction by law, which is same as in U.S..2. There is some difference between the theoretical price discount according the existing valuation model and the practical price discount, and the difference will be smaller because of the longer period and smaller volatility.3. The arithmetic average model based on the Longstaff model and Finnerty model has stronger ability to explain the practical price discount than other existing model, especially to the samples from the reform of segmentation in share-holder.4. The large scale reduction of restricted A stock is not likely to happen, if not government adjusts the structure of state-owned assets.5. The reduction caused the adverse impact to market price of restricted stock from the he reform of segmentation in share-holder, but this phenomenon is unavailable in IPO placement.The main innovations of this dissertation are listed as follows:1. Based on the Longstaff model and Finnerty model, we acquired a now valuation model, which has stronger ability to explain the practical price discount than other existing model, especially to the samples from the reform of segmentation in share-holder.2. According the related valuation model and samples from the IPO placement and the reform of segmentation in share-holder, we get the theoretical and practical price discount. By comparing the theoretical to practical price discount, we find the some factors influence the effective and robust of valuation model.3. We analyze the reduction of restricted stock by building the model, and make empirical study to effects of reduction of restricted stock in different category samples.