Senior Visiting Financial Economist

China is one of the largest emerging markets in the world that adopts the limit order trading mechanism. In addition to the complicated ownership structure – a consequence a transitional economy – Chinese firms also actively seek to list and raise funds from a variety of overseas markets. This research provides a comprehensive study on bid-ask spreads and spread components for Chinese stocks listed on domestic and international exchanges. We find that domestic investors trading A- and B-shares inside China face lower bid-ask effective spreads than foreign investors trading ADRs in New York or trading H-shares and red-chips in Hong Kong. The wider effective spreads on international exchanges can be attributed to both a higher degree of information asymmetry (price impact) and higher revenues (realized spread) collected by liquidity suppliers. We also examine the implication of ownership structure on bid-ask spread and its components. Interestingly, we find that firms with a higher proportion of tradable A-shares face lower effective spreads and price impacts. Our evidence is consistent with both th