Tighter regulations

China Economic Weekly - - Contents -

Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), has pointed out that listed firms that engage in “illicit practices” on the stock market should “pay a heavy price”. Usually, a stock split follows a share price rise to very high levels, beyond the prices of shares of similar companies in a sector. It is done to make a company’s stock seem more affordable to small investors. The underlying value of the company concerned does not change as the market capitalization remains unaltered. The CSRC said it will regulate any tendency among companies to overuse stock splits. Companies should focus on their business performance and make full disclosures as to why they are resorting to stock splits.

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