Market Segmentation and Information Values of Earnings Announcements: Some Empirical Evidence from an Event Study on the Chinese Stock Market

• Main Authors: GAO, Yu, TSE, Yiu Kuen
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2002
• Subjects: Econometrics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/1193; https://ink.library.smu.edu.sg/context/soe_research/article/2192/viewcontent/Gao_Tse1.pdf
• Institution: Singapore Management University

This paper investigates the trading activities of two distinct classes of shareholders, namely, the Chinese domestic investors and the foreign investors in the segmented Chinese A-share and B-share markets, respectively. We conduct an event study on the annual earnings announcements based on two different accounting standards: IAS and PRC GAAP. The earnings announcements based on IAS and PRC GAAP are value relevant. The investors in the B-share market react to both the IAS and PRC GAAP earnings announcements, while the investors in the A-share market pay more attention to the PRC GAAP earnings reports. In the B-share market, positive abnormal returns are associated with positive earnings surprise and negative abnormal returns go with negative earnings surprise. We find pre-event abnormal trading volumes without significant price changes for the A shares, which may be due to existing information in the A-share market prior to earnings announcements. The post-event abnormal trading volumes last for a longer period in the Ashare market than in the B-share market.