Abstract
We study return comovement and relative pricing of two classes of shares with identical voting rights and cash-flow rights but for different investor clienteles: A-shares for domestic investors and B-shares for foreign investors. We first document a surprisingly low return comovement between A- and B-shares of the same firm, which is even lower than the average B-shares comovement with B-shares issued by different firms. Local investor property rights protection of the city where the firm is incorporated, and several firm opaqueness measures, explain the cross-sectional variations of the low comovement. In addition, local investor property rights protection and firm opaqueness also explain the relative pricing of A-B shares.
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