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Stock price reactions to earnings announcements: evidence from Chinese markets
Author(s) -
Su Dongwei
Publication year - 2002
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(02)00085-x
Subject(s) - earnings per share , earnings , share price , price–earnings ratio , stock (firearms) , monetary economics , stock dilution , business , economics , stock price , financial economics , stock market , restricted stock , stock exchange , finance , mechanical engineering , paleontology , horse , series (stratigraphy) , engineering , biology
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.