What's in a 'China' Name? A Test of Investor Attention Hypothesis

Abstract

We study whether firm name affects investor attention and thereby firm valuation. Some Chinese firms listed on U.S. stock exchanges have the word “China” or “Chinese” included in their company names (“China-name stocks”), whereas others do not (“non-China-name stocks”). During the China stock market boom in 2007, we find that China-name stocks significantly outperform non-China-name stocks. This is not due to differences in firm characteristics, risk, or liquidity. The “China-name effect” is largely consistent with the investor attention hypothesis that the price pressure caused by increased investor attention on China-name stocks during the boom period drives up China-name stocks more than non-China-name stocks.

Keywords: China-name Stocks, Investor Attention, Initial Public Offering, American Depositary Receipt

JEL Classification: G10, G14