Investor Responses to Earnings Announcements - a Comparison of Chinese A and B Stock Markets
25 Pages Posted: 27 Aug 2007
Date Written: August 24, 2007
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: Suggested Citation