Thesizeofthediscountisstrikinginbothofthesestudies.It
isdifficulttoseewhyaninvestorwouldbewillingtoaccepta
40 percent discounton estimatedvalue if an initial public
offeringisforthcoming.Itseemslikelythatwhatthesestudies
conclude is a marketability discount is reflective of other
factors.
Share Classes
Somecompanieshavemultipleclassesofsharesinthesame
market,withsomeclassesbeingmoreliquidthanothers. If
therearenootherdifferences(invotingrightsordividends,
forinstance)acrosstheclasses,thedifferenceinpricescanbe
attributedtoliquidity.OnecandidateforstudyistheChinese
market,where mostcompanieshaveRestrictedInstitutional
Shares (RIS), which are almost completely illiquid,
55 and common shareswhich aretraded ontheexchange.
Chen and Xiong (2001) compare themarket pricesof the
traded common stock in 258 Chinese companies with the