Social Trust and Differential Reactions of Local and Foreign Investors to Public News

55 Pages Posted: 13 Apr 2015 Last revised: 23 Apr 2015

See all articles by Chunxin Jia

Chunxin Jia

Peking University - Guanghua School of Management

Yaping Wang

Peking University - Guanghua School of Management

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 2015

Abstract

This paper uses the segmented dual-class shares issued by several dozen Chinese firms---A shares to local Chinese investors and H shares to foreign investors---to compare reactions of local and foreign investors to the same public news. We find that local investors react more strongly to earnings forecasts by local analysts, while foreign investors react more strongly to forecasts of foreign analysts. This finding highlights social trust as a force driving people with different social backgrounds to react differently to the same information.

Suggested Citation

Jia, Chunxin and Wang, Yaping and Xiong, Wei, Social Trust and Differential Reactions of Local and Foreign Investors to Public News (April 2015). NBER Working Paper No. w21075, Available at SSRN: https://ssrn.com/abstract=2593654

Chunxin Jia (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Yaping Wang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China
8610-62768188 (Phone)

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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