The Impact of Mandatory vs Voluntary Ownership Transfers on Stock Price Informativeness: The Case of Split Share Structure Reform in China

We compare the impact of mandatory against voluntary ownership transfer on stock price informativeness using the unique research setting provided by the Split Share Structure Reform in China. Ownership transfers from state to private entity are expected to improve corporate governance, which in turn reduce managerial incentives to withhold value-relevant information to outside investor. However, we show that voluntary transfers initiated by firms are associated with significantly greater increases in stock price informativeness than mandatory transfers required by the Split Share Structure Reform. This implies that firm incentives are more effective in improving corporate governance than regulatory intervention.