A fundamental question in finance is whether and how removing market frictions is associated with efficiency gains. We study this question using share issue privatization in China that took place through the split share structure reform. Prior to the reform, domestic A-shares were divided into...

A fundamental question in finance is whether and how removing market frictions is associated with efficiency gains. We study this question using share issue privatization in China that took place through the split share structure reform. Prior to the reform, domestic A-shares were divided into...

We find that China's P/E ratio is comparable to that of the U.S. S&P 1500 index, a broad based index covering large, middle, and small capitalization firms. We provide an explanation as to why China's seemingly low P/E ratio is not surprising in light of the economic growth that it has...