Investor Responses to Earnings Announcements - a Comparison of Chinese A and B Stock Markets

25 Pages Posted: 27 Aug 2007

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Juan Yao

University of Sydney - Business School - Finance Discipline; Financial Research Network (FIRN)

Date Written: August 24, 2007

Abstract

This study undertakes an empirical examination on the Chinese investors' responses to earnings announcements. We use matched pairs of stocks listed in both the A and B market to examine the changes in returns and trading volumes around announcements. We examine the differences in the magnitude of the changes in returns and volumes of A and B shares to access which market reacts more efficiently. We found that the earnings announcements are informationally valuable to both domestic and foreign investors. The A-share market is less responsive to both positive and negative earnings announcements compared to their foreign counterparties. It is consistent with previous literature that B market is less informed as it takes longer for the B-share investors to react. However, this difference disappears after November 2002 when trading restrictions on the investors are reduced. It looks that the regulatory change has improved the market efficiency.

Keywords: Earnings Responses, Chinese Stock Markets, Market Efficiency

JEL Classification: G14, G15

Suggested Citation

Comerton-Forde, Carole and Yao, Juan, Investor Responses to Earnings Announcements - a Comparison of Chinese A and B Stock Markets (August 24, 2007). 20th Australasian Finance & Banking Conference 2007 Paper, Available at SSRN: https://ssrn.com/abstract=1009442 or http://dx.doi.org/10.2139/ssrn.1009442

Carole Comerton-Forde

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Juan Yao (Contact Author)

University of Sydney - Business School - Finance Discipline ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 93517650 (Phone)
+61 2 9351 6461 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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