Article2002

Stock price reactions to earnings announcements: evidence from Chinese markets

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Financial Markets and Investment Strategies Auditing, Earnings Management, Governance Financial Analysis and Corporate Governance

Abstract

Abstract We examine the stock price reactions to changes in earnings per share (EPS) in the Chinese stock markets. We find that domestic A‐share investors do not correctly anticipate the changes in earnings and fail to adjust new earnngs information quickly, but international B‐share investors can predict earnings changes better than A‐share investors. As a result, abnormal returns (ARs) can be obtained by trading on the earnings information, but for A shares only. An explanation is that most A‐share holders are individuals with short‐term investment horizon while most B‐share holders are large institutions that trade on more detailed and accurate financial information not immediately available to A‐share holders.

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References

1985Using daily stock returns 1968An Empirical Evaluation of Accounting Income Numbers 1989Cross-sectional variation in the stock market response to accounting earnings announcements 1993The Relative Informativeness of Accounting Disclosures in Different Countries 1993A Comparison of the Value-Relevance of U.S. Versus Non-U.S. GAAP Accounting Measures Using Form 20-F Reconciliations 1984An Empirical Investigation of the Effect of Quarterly Earnings Announcement Timing on Stock Returns 1988Seasonalities in security returns 1996The Strategic Timing of Corporate Disclosures

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