A-share Why Relative To The H-share Premium?

Since the 1970s,Western scholars have conducted so much research boththeoretically and empirically on the issue of"one stock with many prices"which isgenerally observed in cross-listed companies,that they proposed various internationalasset pricing models,market seg-mentation hypothesis,liquidity differentialshypothesis,information asymmetry hypothesis,demand elasticity differentialshypothesis,and tried to use behavioral financial theory to explain the pricingdifferences of certain"twin"stocks. Generally speaking,their theoretical explanationswent well with the phenomenon of foreign shares premiums relative to domesticshares in most international stock markets. However,when dealing with China's"A+B"and"A+H"cross-listed companies,Western scholars feel at a loss for thesignificant premiums of A shares (domestic shares) relative to B or H shares (foreignshares). As a result,they simply called A share premiums as a"special case"(Bailey etal.,1999),or admit the Chinese case to be a"Puzzle"(Fernald and Rogers,2000).Since the 1990s,more and more research has be carried out as to the pricedifferentials of China's"A+B"shares. However,H-share market is more importantthan the B-share market,and there're already 55"A+H"cross-listed companies by2008-06-30. So it's a pity that rare studies have been made as to the pricingdifferences of"A+H"shares. Therefore,it is of great use of investigating into the"Puzzle"of A-H share premium,taking"A+H"cross-listed companies as specimen.The dissertation is composed of seven chapters:Firstly,Chapter One gives the background,the importance,the strcuture,themethods,as well as the innovations and shortcomings of the study.Secondly,through literature review (Chapter Two) and comparison of the pricedifferen-tials of cross-listed companies both at home and abroard (Chapter Three),weconfirm the"Puzzle of A-H Share Premium".Thirdly,we look into the causes and influencing factors of A-H Share Premiumfrom three angles-Chapter Four deals with the impact of A-Share's IPO pricing upon A-H Sharepremium. A strong correlation is found between A-Share's IPO pricing premium(relative to H-Share prices) and A-H Share premium. However,A-H Share premium ismuch higher than A-Share's IPO pricing premium,and the main cause lies in under-pricing in A-Share's initial public offering.Chapter Five analyses the impact of market segmentation on A-H Share premium.China's stock market demonstrates unique features in market segmention. Undercontrol of cross-border capital flows,the A-share market is highly closed from theworld market (including Hong Kong stock market),thus the monetary foctorrepresented by basic pionts spread of deposit interests of Mainland and Hong Kong isa key factor influncing the magnitude of A-H premiums. Chapter Six finds that four micro-factors-liquidity differences between A and Hshares,the proportion of non-tradable A-Shares,behavioral differences between A andH shareholders,and information asymmetry between A and H shareholders-are allcontributable to A-H Share Premium. Especially,empirical study finds that A share'spremium rate will decrease by 3.5 percentage points for every one percentage point'sdecrease in the proportion of non-tradable A-shares,with other conditions unchanged.Finally,Chapter Seven consists of a summary of the whole study and a prospect ofChina's capital market segmentation and the trend of A-H premiums in the future.