Securities Class Actions of Chinese Companies

Feng, N. C., & Fuerman, R. D. (2018). Securities class actions of Chinese companies. Corporate Ownership & Control, 15(4), 107-130. http://doi.org/10.22495/cocv15i4art10

24 Pages Posted: 21 Sep 2022

See all articles by Nancy Chun Feng

Nancy Chun Feng

Suffolk University

Ross D. Fuerman

Suffolk University - Department of Accounting

Date Written: August 15, 2018

Abstract

This paper provides the first empirical evidence documenting the determinants and outcomes of private securities class action lawsuits filed in the US and Canada against Chinese companies and their auditors. Our findings show that, in the global context, Chinese companies are positively associated with their auditors being defendants and experiencing an adverse outcome (for example, related government enforcement actions and/or settlement payments to terminate class actions). A group of companies from outside the US with low country level audit quality, the Chinese companies, and the overall global sample were compared. For the low country level audit quality comparison group, we found that a restatement was negatively associated with auditors being defendants; this is a new finding. Two unique Chinese characteristics are that reverse mergers are positively associated with auditor litigation and bankruptcy has no association with auditor litigation. Aggregate Chinese companies’ settlements are positively associated with the occurrence of an
auditor settlement and with class period length. Auditor settlements are associated with several factors. No mainland China CPA firm has ever paid to settle a private securities class action filed in the US or Canada; this also is a new finding. Several factors explain this last result.

Keywords: China, Hong Kong, Securities Class Actions, Auditor Litigation, Audit Quality, Reverse Mergers.

JEL Classification: K41, M42, K33

Suggested Citation

Feng, Nancy Chun and Fuerman, Ross D., Securities Class Actions of Chinese Companies (August 15, 2018). Feng, N. C., & Fuerman, R. D. (2018). Securities class actions of Chinese companies. Corporate Ownership & Control, 15(4), 107-130. http://doi.org/10.22495/cocv15i4art10, Available at SSRN: https://ssrn.com/abstract=4190468

Nancy Chun Feng

Suffolk University ( email )

120 Tremont St
Boston, MA 02108
United States
617-573-8719 (Phone)

Ross D. Fuerman (Contact Author)

Suffolk University - Department of Accounting ( email )

Sawyer Business School
Department of Accounting
Boston, MA 02108
United States
617-573-8615 (Phone)

HOME PAGE: http://www.suffolk.edu/business/faculty/12328.php

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