Table Of ContentExperiences and Challenges in the Development of the
Chinese Capital Market
Experiences and Challenges
in the Development of the
Chinese Capital Market
Edited by
Douglas Cumming
Professor and Ontario Research Chair, Schulich School of Business,
York University, Canada
Alessandra Guariglia
Professor of Financial Economics, University of Birmingham, UK
Wenxuan Hou
Reader in Finance, The University of Edinburgh Business School, UK
Edward Lee
Professor of Accounting and Finance, Manchester Business School, UK
Selection, introduction and editorial matter © Douglas Cumming,
Alessandra Guariglia, Wenxuan Hou and Edward Lee 2015
Individual chapters © Respective authors 2015
Softcover reprint of the hardcover 1st edition 2015 978-1-137-45462-1
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Library of Congress Cataloging-in-Publication Data
Experiences and challenges in the development of the Chinese capital
market / edited by Douglas Cumming, Professor and Ontario Research Chair,
Schulich School of Business, York University, Canada, Alessandra Guariglia,
Professor of Financial Economics, University of Birmingham, UK, Wenxuan
Hou, Reader in Finance, The University of Edinburgh Business School, UK,
Edward Lee, Professor of Accounting and Finance, Manchester Business
School, UK.
pages cm
ISBN 978-1-349-56042-4 (alk. paper)
1. Capital market – China. 2. Banks and banking – China. 3. Securities –
China. I. Cumming, Douglas, editor.
HG4523.E9397 2015
3329.04150951—dc23 2015012340
Contents
List of Figures v ii
List of Tables v iii
Notes on Contributors x
1 Introduction to Current Issues and Development of the
Chinese Capital Market 1
Douglas Cumming, Alessandra Guariglia, Wenxuan Hou, and
Edward Lee
2 Performance of Commercial Banks in China: Traditional and
Non-traditional Business, Ownership Type, and Government
Interest Rate Policies 4
Wei Li and Steven Shuye Wang
3 Effects of Heterogeneity on Measuring Efficiency Scores:
The Case of China’s Banking Sector 37
Yizhe Dong, Douglas Cumming, Alessandra Guariglia,
Wenxuan Hou, and Edward Lee
4 Dividends in China 68
Elisabeth Dedman and Wei Jiang
5 Ownership, Financial Constraints and Firm Performance:
Foreign Acquisitions of Chinese Firms 89
Yuhuilin Chen and Xiuping Hua
6 The Dysfunctional Response to Political Connections 1 08
Ziqiao Yan, Wanli Li, and Wei Sun
7 The Value of Political Networks: Evidence from a Natural
Experiment 130
Tinghua Duan, Nan Li, and Wenxuan Hou
8 The Stock Return Predictability and Stock Price
Decomposition in the Chinese Equity Market 1 50
Jun Ma, Zhenhua Su, and Mark E. Wohar
v
vi Contents
9 Media Coverage and Stock Returns: Evidence from Chinese
Cross-Listed Firms 171
Chen Wang, Rong Ding, Wenxuan Hou, and Edward Lee
Index 1 97
List of Figures
2.1 Percentage of total assets by bank type (2003–2013) 10
2.2 Percentage of non-traditional activities income to total
operating income by bank type 17
2.3 Return on assets of sample banks (2000–2013) 19
2.4 Return on equity of sample banks (2000–2013) 20
2.5 One year financial institutional deposit interest rate,
one year resident deposit interest rate, and net interest
rate margin (NIM) over the period of 1996–2013 23
2.6 Year-end reserve requirement ratio in China (1984–2013) 23
3.1 Distributions of estimated cost efficiency across models 57
3.2 Average efficiency scores over time 57
4.1 Dividend payout ratios over time in China, US, and UK 77
4.2 Dividend payout ratios in China compared to total cash
payout ratios in US and UK over time 78
4.3 Dividend premia over time in China, US, and UK 79
4.4 Propensity to pay dividends over time in China,
US, and UK 79
7.1 Average cumulative abnormal returns 142
8.1 Filtered estimate of expected dividend growth 1 65
8.2 Filtered estimate of expected returns 166
8.3 Log price-dividend ratio, contribution of expected
dividend growth, and contribution of expected return 167
vii
List of Tables
2.1 Total assets of Chinese banking institutions 9
2.2 Descriptive statistics of banks’ financial variables
(by bank type) 1 6
2.3 Performance of different types of banks (2000–2013) 19
2.4 Benchmark deposit and loan interest rates (1997–2012) 22
2.5 Estimates of regression model (4) 25
2.6 Estimates of regression model (5) 28
3.1 SFA model specifications 45
3.2 Variable definitions 50
3.3 Descriptive statistics of the variables 51
3.4 Key estimation results 52
3.5 Specification tests 54
3.6 Summary statistics of the mean efficiency estimates 56
3.7 Spearman rank correlation between efficiency estimates 59
4.1 Cultural value measures and predicted associations with
dividends 74
4 .2 Dividend payout ratios, premia, and propensities of
China, UK, and US (2002–2012) 77
4.3 Characteristics of payers and non-payers 81
4.4 Logit regressions 8 2
4.5 Market valuation models 84
5.1 Distribution of inward CBM&As by ownership and years 96
5.2 Industry breakdown of the full sample 97
5.3 Distribution of firms involved in the inward CBM&As by
financial constraints and ownership 100
5.4 Relationship between ownership and financial constraints 102
5.5 Analysis of CARS post inward M&As announcement 103
6.1 Descriptive statistics of government subsidies 118
6.2 Descriptive statistics for the multiple regression equations
for total government subsidies 118
6.3 Descriptive statistics of the variables used in analysis 119
6.4 Impact of political connections on firm performance 120
6.5 Political connections and the direction of earnings
management 121
6.6 Accruals-based test of loss recognition 122
viii
List of Tables ix
6.7 Impact of political connections on the degree of earnings
management and unmanaged performance 123
6.8 Impact of political connections on employees, wages,
and welfare 1 24
6.9 Impact of political connections on firm performance 125
6.10 Impact of standardized subsidies 126
7.1 Detailed information about the investigated politicians 139
7.2 Politician sample distribution by characteristics 140
7.3 Descriptive statistics of firm sample 140
7.4 Descriptive statistics of stock returns on event date 141
7.5 Stock return and the announcement of a politician’s
investigation 1 43
7.6 Cumulative abnormal returns and the type of connections 144
7.7 Cumulative abnormal returns to losing political
asset: regression results 145
7.8 Cumulative abnormal returns to losing political
asset: alternative market return and event window 146
7.9 Subsample tests 1 47
8.1 In-sample and out-of-sample forecasts comparisons 154
8.2 State-space estimation results 164
8.3 State-space variance decomposition 166
9.1 Descriptive statistics for news data 182
9.2 Descriptive statistics for variables 184
9.3 Panel regression results for cross-listed shares 186
9.4 Panel regression results for ROA on cross-listed
A shares and B and H shares 188
9.5 Event study of the stock reaction to news 191
