The impact on stockholder wealth of the split share structure reform

The split share structure reform is an issue unique to stock markets in China. This paper examines the relationship between the reform and the wealth of circulating shareholders. Our event study picks out 100 firms which have already carried the share reform in 2006 as samples. Empirical results demonstrate that the market reacts significantly to the share reform plan 10 days before the announcement and Cumulative Abnormal Return (CAR) has been increasing step by step. But, after the announcement, CAR shows a down warding trend that lasts until 30 days after the announcement, and at that time, the impact of share reform on shareholders' wealth is significantly negative. This paper indicates, compared with non-circulating shareholders whose wealth multiplies, circulating shareholders do not receive any significant return or compensation after the implement of the reform.