The Chinese Stock Market Volume II (eBook)

Michael Cole, University of Liverpool, UK Kun Guo, University of Chinese Academy of Sciences, China Chen Hao, Nankai University, China Weian Li, Tianjin University of Finance and Economics, China Jiajing Sun, University of Chinese Academy of Sciences, China

Cover 1
Half-Title 2
Title 4
Copyright 5
Contents 6
List of Figures 12
List of Tables 15
Preface 19
Notes on Contributors 23
1 Analysis, Evaluation, and Prediction of China’s Stock Market 24
1.1 Evaluation of China’s stock market 24
1.1.1 On a macro scale there has been much progress, but from a micro view there exist many problems 24
1.1.2 A market in its infancy 44
1.1.3 Overall quality needs to be improved 52
1.2 Analysis of the four main factors that influence the development of China’s stock market 54
1.2.1 China’s economic fundamentals 54
1.2.2 Quality of listed companies 57
1.2.3 Quality of investors 67
1.2.4 Regulatory results 71
1.3 D evelopment prospects of China’s stock market 75
1.3.1 Outlook of China’s stock market over the next decade 75
1.3.2 Protection of investors’ interests will be an important duty of regulatory authority 76
1.3.3 The market will gradually play a decisive role in the allocation of resources in China’s stock market 78
1.3.4 The CSI 300 Index will replace the Shanghai Composite Index as the weathervane of China’s stock market 81
2 Emergence of China’s 2006–2007 Stock Market Bubble and Its Burst 84
2.1 Background and logical analysis 85
2.2 Macroeconomic background of the stock market boom 87
2.3 Split share structure reform: the institutional basis for stock market boom and hotbed of bubble 90
2.3.1 The historical background of the split share structure reform 90
2.3.2 R easons for the split share structure reform 91
2.3.3 The process of split share structure reform 93
2.3.4 Some deficiencies of the split share structure reform 94
2.3.5 E fforts toward split share structure reform: from the perspective of corporate governance 95
2.4 Characteristics of the business performance cycle of listed companies before and after bull market 104
2.4.1 Construction of overall financial performance indicators of listed companies 105
2.4.2 Overview of relationship between the business cycle and stock market cycle 106
2.4.3 Characteristics of the inflection point for listed companies’ performance cycle at the initial stage of a bull market 107
2.4.4 Characteristics of the profit distribution structure of listed companies in the bull market 107
2.4.5 The turning point of expected business performance at end of the bull market 114
2.5 Valuation of China’s stock market and its bubble in 2006–2007 120
2.5.1 R eview of the literature and valuation methods 120
2.5.2 Valuation analysis in the context of capital controls 123
2.5.3 Market valuation methods in the context of the capital markets’ opening up 128
2.5.4 Structural problems of the stock market bubble 139
2.6 Summary and outlook 141
2.6.1 Summary of the stock market’s prosperity, bubble and aftermath 141
2.6.2 Implications and outlook of this study 142
3 Mechanisms and Performance of Chinese Bear Markets and Policy Suggestions 148
3.1 Defining a bear market 148
3.2 The ‘risk-return’ characteristics in bull and bear markets in Chinese stock markets 153
3.2.1 Relevant theories and the status quo of empirical research 154
3.2.2 Introduction to empirical methods 156
3.2.3 Data and variables 159
3.2.4 A review of the overall risk–return relationship and its cyclical characteristics 160
3.2.5 Conclusions and inspiration 168
3.3 The amplitude, duration and volatility persistence trade-off relationship for stock markets 168
3.3.1 Background information and implications of our work 170
3.3.2 An asset pricing model based on information diffusion 172
3.3.3 Evidence from Chinese and international stock markets 177
3.3.4 Algorithm for generating the frontier and its application in tracking the market bottom of Chinese stock markets 182
3.4 Major problems during the stock market adjustment period and policy suggestions 185
3.4.1 Quality problems of listed companies 186
3.4.2 Difficulties of delisting 192
3.4.3 The issue of shell resources 199
3.4.4 Policy orientation and proposals under the trend of market reforms 201
3.5 Conclusion 204
4 Corporate Governance Evaluation Research of China’s Listed Companies 213
4.1 Reform development history of corporate governance in China 213
4.2 Corporate governance evaluation and governance index 217
4.2.1 Significance of corporate governance evaluation 217
4.2.2 Major corporate governance evaluation systems at home and abroad 221
4.3 R& D and composition of corporate governance index of China’s listed companies
4.3.1 R& D process of corporate governance index of China’s listed companies
4.3.2 Composition of corporate governance index of China’s listed companies 228
4.4 Basic situation of corporate governance evaluation sample of China’s listed companies 229
4.4.1 Basic overview of evaluation sample over the years 229
4.4.2 2013 sample source and selection 234
4.4.3 Industry distribution situation of 2013 sample 236
4.4.4 Controlling shareholders distribution of 2013 sample 237
4.4.5 Area distribution of 2013 sample 238
4.4.6 Sector distribution of 2013 sample 238
4.5 Overall analysis on corporate governance of China’s listed companies 239
4.5.1 Overall description of corporate governance of China’s listed companies 239
4.5.2 Analysis of corporate governance of China’s listed companies by industry 242
4.5.3 Analysis of corporate governance index of China’s listed companies by controlling shareholder’s nature 242
4.5.4 Corporate governance analysis of China’s listed companies by area 247
4.6 Corporate governance analysis of China’s listed companies by dimension 251
4.6.1 Shareholder governance evaluation of China’s listed companies 251
4.6.2 Board of directors governance evaluation of China’s listed companies 258
4.6.3 Board of supervisors governance evaluation system of China’s listed companies 265
4.6.4 Management level governance evaluation of China’s listed companies 271
4.6.5 Information disclosure evaluation of China’s listed companies 275
4.6.6 Stakeholder governance evaluation of China’s listed companies 281
4.7 Corporate governance analysis of China’s listed companies by board 288
4.7.1 The overall analysis of corporate governance of China’s listed companies by board 288
4.7.2 Corporate governance analysis of China’s companies listed on the small and medium board 288
4.7.3 Corporate governance analysis of companies listed on the Chi next 290
4.7.4 G overnance analysis of China’s listed financial institutions 291
4.8 Corporate governance and financial performance of China’s listed companies 294
4.8.1 Corporate governance and profitability 294
4.8.2 Corporate governance and growth 295
4.9 Conclusions and suggestions 302
4.9.1 Main conclusions about the corporate governance status of China’s listed companies 302
4.9.2 Suggestions to improve the corporate governance level of China’s listed companies 306
5 Study on the Comprehensive Stock Market Quality Evaluation System 311
5.1 Faults of China’s stock indices and the necessity to build a comprehensive evaluation system 311
5.1.1 Existing calculation methods for stock indices 311
5.1.2 P roblems of existing stock indices 318
5.1.3 The role and importance of a comprehensive stock market evaluation system 319
5.2 Design of the comprehensive evaluation indicator system and selection of representing variables 320
5.2.1 Establishment of the comprehensive evaluation indicator system 320
5.2.2 Selection of representing variables 321
5.3 Changes of each indicator in the recent decade 323
5.3.1 Stock market scale 323
5.3.2 Stock market concentration 324
5.3.3 Stock market growth rate 327
5.3.4 Stock market fluctuation 328
5.3.5 Correctness of estimate 330
5.3.6 Market speculation 333
5.3.7 Management performance of listed companies 334
5.3.8 Extent of impact from policy information 335
5.3.9 Stock equity structure 336
5.3.10 Stock market liquidity 337
5.4 Measurement on the comprehensive quality of China’s stock market 338
5.4.1 Quantitative display of evaluating indicators 338
5.4.2 P rincipal component analysis of evaluation indicators 343
5.4.3 Overall quality evaluation of China’s stock market 349
5.5 International comparison of stock markets’ comprehensive quality 351
5.6 Main conclusions 353
Index 357