Accounting-Based Regulation and Protection of Minority Shareholders
This paper examines the impact of a seasonal equity offering (SEO) regulation based on accounting profitability numbers (accounting-based regulation hereafter) on the stock market in China. Although positive accounting theory predicts that regulations based on accounting numbers could induce entrant...
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| Main Authors: | , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2005
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/soa_research/77 |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper examines the impact of a seasonal equity offering (SEO) regulation based on accounting profitability numbers (accounting-based regulation hereafter) on the stock market in China. Although positive accounting theory predicts that regulations based on accounting numbers could induce entrants’ incentive to opportunistically manipulate these accounting numbers, we find that the accounting-based regulation in China could protect minority shareholders. Specifically, Chinese market generally positively reacts to announcement of the accounting-based regulation. In addition, we find that investors react less negatively to SEO proposal announcements made by Chinese listed companies when there is an accounting-based regulation than when absent. The beneficial effect of accounting-based regulation in China may due to the prevalence of controlled companies and the weakness of other institutional, market, cultural, and legal constraints. |
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