How Do Corporate Control Rights Transactions Create Shareholder Value? Evidence from China

We investigate the stock price performance of companies that become a block trade target in China where unique institutional characteristics exist. As with US evidence, stock prices of target companies positively react to the announcement of block trades. The positive effect of block trades becomes small as the target firm had high director ownership before the block trade. Publicly tradable share (PTS) transactions experience better stock price performance than non-publicly tradable share (NPTS) transactions do probably because share non-tradability provides NPTS bidders with only weak incentives of value maximization. Meanwhile, the divergence of bidding price from the market price does not impede value creation. We find no evidence that shareholders of SOEs receive gains by transferring the control rights to private parties