Takeover Possibility and Market Response to Loss News Under Chinese ST Delisting Regulation

Asian-Pacific Journal of Accounting and Economics, 20(2), 101-117, 2013

30 Pages Posted: 6 Oct 2009 Last revised: 22 Mar 2021

See all articles by Sakthi Mahenthrian

Sakthi Mahenthrian

Butler University

Xiaonong Zhang

Nankai University

Henry He Huang

Yeshiva University - Sy Syms School of Business

Date Written: September 30, 2009

Abstract

This study examines whether the market reaction to firms’ second consecutive loss news is influenced by the firms’ likelihood of being taken over. Firms with two consecutive losses in China are subject to the “special-treatment (ST)” delisting regulation. We have two important findings. First, ST firms with certain characteristics (i.e. smaller firms with lower beta, lower accounting performance, higher leverage, and larger ownership concentration) are more likely to be taken over. Second, the market returns for the second consecutive loss news are higher for firms with a higher likelihood of being taken over.

Keywords: delisting regulations, distressed firms, corporate governance, earnings management

JEL Classification: G33, G34, G38

Suggested Citation

Mahenthrian, Sakthi and Zhang, Xiaonong and Huang, Henry, Takeover Possibility and Market Response to Loss News Under Chinese ST Delisting Regulation (September 30, 2009). Asian-Pacific Journal of Accounting and Economics, 20(2), 101-117, 2013, Available at SSRN: https://ssrn.com/abstract=1483362

Sakthi Mahenthrian (Contact Author)

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

Xiaonong Zhang

Nankai University ( email )

94 Weijin Road
Tianjin, 300071
China

Henry Huang

Yeshiva University - Sy Syms School of Business ( email )

New York, NY 10033
United States

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