The Event Study of Split Share Structure Reform

The split share structure has been blamed as the key culprit for China's stagnant stock market, and the reform is the "most significant" in the country after the nation set up the stock market in the 1990s. This paper use event study to test whether investor could get abnormal return during split share reform process. The empirical results indicate that is no abnormal return of the share when companies take part in the split share reform; it is different from common anticipation. Both standardized abnormal market return and cumulative total standardized abnormal market return differed significantly from zero. This paper argues although the reform is the most significant in the share market, the rational investor will not anxious to purchase the share in order to get additional share as compensation. The intrinsic value of listed company determined the price of share is gospel.