event study

  • 详情 Release of Information at Shareholder Meetings in China: Have Regulatory Changes Increased Their Information Content?
    This paper studies how regulatory changes affect investors’ reactions at shareholder meetings in China. The objective of this paper is twofold: first, to analyse the information content transmitted to the shareholders of the largest Chinese companies listed on the China Securities Index 300 when an Annual General Meeting is held. A distinction is made between ordinary and extraordinary general meetings. Second, to find out if regulatory changes related to the Company Law of China and online voting in Annual General Meetings affect the information content of those meetings. The abnormal return obtained is examined through an event study using the Fama-French five-factor model. The results of our study indicate that the release of information and involvement of minority shareholders in general meetings during the research period led to higher return volatility and traded volume.
  • 详情 The Information Content of Corporate Disclosure Via Wechat Public Account
    During the past decade, Wechat-public-accounts (WPAs) have gained increasing popularity as a novel tool for voluntary disclosure among Chinese public firms. This paper examines whether WPA disclosures provide value-relevant information to the market. Using a topic model to process over 1.6 million WPA articles during 2012-2020 and an event study design, we find that the stock market reacts strongly following a WPA disclosure event and the magnitude varies with the topic and textual feature of the WPA articles. We further present evidence that firms use their WPAs to provide new information rather than reinforce information that is already presented in other channels. Moreover, financial analysts, journalists, and retail investors rely on corporate WPAs for their information production. Collectively, our findings indicate that corporate WPAs are an economically significant source of new information for market participants that supplement traditional disclosure channels considered in prior studies.
  • 详情 Impacts of CME changing mechanism for allowing negative oil prices on prices and trading activities in the crude oil futures market
    This study investigates and compares the effects of the Coronavirus Disease 2019 (COVID-19) pandemic, the Chicago Mercantile Exchange (CME)'s negative price suggestion on prices and trading activities in the crude oil futures market to discuss the cause of negative crude oil futures prices. Through event studies, our results show that the COVID-19 pandemic no longer impacts crude oil futures prices in April after controlled market risk, while the CME’s negative prices suggestion can explain the crude oil futures price changes around and around even after April 8 to some degree. Moreover, our study uncovers anomalies in prices and trading activities by analyzing returns, trading volume, open interest, and illiquidity measures using vector autoregressive (VAR) models. The results imply that CME’s allowing negative prices strengthens the price impact on trading volume and makes illiquidity risk matter. Our results coincide with the following lawsuit evidence of market manipulation.
  • 详情 Cracking Down on Fake State-Owned Enterprises in China
    Using a unique list of 528 fake state-owned enterprises (SOEs) exposed in China, we examine whether and how investors react to the government’s property rights protection actions. Our results show that real SOEs with more subsidiaries, pyramid layers, and popularity are more likely to be targeted by wrongdoers. We find that when fake SOEs were exposed, it caused a significant increase in the stock prices of listed central SOEs controlled by the State Council. Further analysis shows that the stock price rise is driven by both the cash flow and risk effects. We also find that the value impact of the crackdown is more pronounced for listed central SOEs with less media coverage, located in weaker legal protection regions, and facing more competition. Overall, our findings provide empirical support for the effectiveness of exposure, as a non-litigation channel of property rights protection, in enhancing firm value.
  • 详情 Valuation Effects of US-China Trade Conflict: The Role of Institutional Investors
    Employing an event study approach on the US-China trade conflict, we find that Chinese listed firms with institutional investor holdings exhibit smaller announcement loss than their counterparts. We also examine the heterogeneous effects of firms. Specifically, the positive effect of institutional investor holding is larger for firms with foreign exposure or in provinces with higher degree of marketization. Besides, institutional investor holding also reduces firms' financial cost of refinancing and improves their long-run performance given the same announcement loss. These findings help understand the role of institutional investor in achieving financial stability from the micro perspective.
  • 详情 Foreign Discount in International Corporate Bonds
    In the dollar-denominated corporate bond market, 42% of bonds with an amount outstanding of USD 5.9 Trillion are issued by non-US firms. Despite the increasing importance of cross-border financing, foreign issuers are paying an extra premium of 23 bps, compared with their US counterparts. A similar foreign discount exists in the euro-denominated corporate bond and dollar-denominated sovereign bond market. Contrary to the common view, the standard risk and risk aversion cannot explain the discount. I propose a theoretical explanation based on uncertainty aversion. The model can generate the uncertainty effect in the cross-section and the volatility effect in the time series, both are supported by the data. Taking Covid-19 as an event study, I further document a foreign squeeze effect by showing that foreign dollar bonds suffer higher selling pressure relative to US dollar bonds during market turmoil. Such foreign discount (USA effect) dominates the dollar safety premium (USD effect). My results highlight the foreign discount and foreign squeeze effects in the international cross-border investment and financing.
  • 详情 Equilibrium Consequences of Corruption on Firms: Evidence from China’s Anti-Corruption Campaign
    We use China's recent anti-corruption campaign as a natural experiment to examine the (market expected) equilibrium consequences of (anti-)corruption. We argue that the announcement of inspections of provincial governments by the Central Commission for Discipline Inspection (CCDI) on May 17, 2013 represents a significant departure of past norms of anti-corruption campaigns, and thus serves a rare empirical opportunity to examine the equilibrium effects of anti-corruption campaigns for firms. We first present a conceptual framework to illustrate the channels through which anti-corruption actions can influence firms. Using an event study approach and May 17, 2013 as the event date, we find that, overall, the stock market responded positively to the announcement of strong anti-corruption actions. The announcement returns are significantly lower for luxury-goods producers, and SOES, large firms, or politically connected firms earn lower returns than private, small, or non-connected firms. We also find that existing local institutions play a crucial role in determining the announcement returns across firms. Moreover, a long-term difference-in-differences analysis shows that higher returns during the event window are associated with more subsequent entries of new firms and faster expansions of existing firms. Finally, we also provide direct evidence consistent with the endogenous grits effect.
  • 详情 Can Stock Trading Suspension Calm Down Investors During Market Crises?
    This paper studies the trading behavior of investors facing a large number of firm-initiated stock trading suspension events during the Chinese stock market crisis in July of 2015. Using account-level trading data from the Shanghai Stock Exchange, we find that investors with a higher fraction of holding value in suspension sell less (or purchase more) of non-suspended stocks. Consequently, non-suspended stocks whose shareholders having high average account level suspension fraction experience a relative price appreciation, which subsequently reverses. These evidences indicate that trading suspension can calm down investors and therefore helps to stabilize the volatile market in crisis time.
  • 详情 Portfolio Management During Epidemics: The Case of SARS in China
    This paper assesses the impact of the severe acute respiratory syndrome (SARS) on the stock market of China. Our results indicate that the Chinese stock market reacts rapidly to the SARS epidemic. We provide strong empirical evidence that the epidemic has an immediate impact on the pharmaceutical and tourism industries. In particular, pharmaceutical companies are benefited from the outbreak of SARS, while the tourism sector is adversely affected. Our results imply the existence of a profitable trading rule during an epidemic.
  • 详情 Wealth Effects and Financial Performance of Cross–Border Mergers and Acquisitions In Five East Asian Countries
    Various studies have been done on wealth effects and financial performance of firms in different countries but have yielded mixed results. Data on completed deals of Cross-border Mergers and Acquisitions (CBMAs) comprising public listed firms with more than ten percent of share acquisition in five East Asian countries were analysed using event study and key financial ratios. Although the results for average abnormal returns in Indonesia and Korea were inconclusive, the results for Malaysia, Thailand and the Philippines suggest that the market had reacted positively adding value to the target firms at merger announcements. There was a significant improvement in targets’ free cash flow after CBMAs when compared to both before CBMAs and also control firms after CBMAs. The results also reveal that that these five East Asian countries have moved towards more efficient markets.