Block trade targets in China

Liping Dong, Konari Uchida, Xiaohong Hou

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


We examine characteristics associated with the probability of Chinese companies being block trade targets. We find that the proportion of non-publicly tradable shares over total outstanding shares is positively related to the probability of firms being block trade targets before the split-share structure reform. Ownership concentration, director ownership, and firm size were negatively related to the frequency of firms being block trade targets during the pre-reform period. Pre-reform firms with high free cash flow were likely to be block trade targets, and bidders paid a high premium to acquire those companies. The cost of a block trade increased significantly after the split-share structure reform, and the frequency of block trades declined considerably. These results suggest that before the reform Chinese bidders mainly pursued private benefits of control rather than capital gains from value-increasing takeovers. After the reform, bidders have bought tradable shares and paid a negative premium, suggesting that being a blockholder in Chinese companies implies costs that exceed benefits.

Original languageEnglish
Pages (from-to)188-201
Number of pages14
JournalJournal of Corporate Finance
Publication statusPublished - Apr 2014

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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