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Rights Issues in the Chinese Stock Market: Evidence of Earnings Management
Author(s) -
Fung HungGay,
Leung Wai K.,
Zhu Jiang
Publication year - 2008
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/j.1467-646x.2008.01019.x
Subject(s) - prospectus , shareholder , earnings , business , initial public offering , accounting , stock (firearms) , stock price , earnings management , economics , monetary economics , finance , corporate governance , mechanical engineering , paleontology , series (stratigraphy) , engineering , biology
Abstract Using 665 rights offerings of Chinese firms, we demonstrate positive but diminishing price effects of successive announcements at the board meeting, the shareholders' meeting, the prospectus release date, and the ex‐rights date, but negative abnormal returns before the ex‐rights date. Public investors value the participation from shareholders of state and legal‐person shares in the rights offerings, which seem to be linked to the future firm performance. The results overall supports the hypothesis that Chinese company earnings are considerably manipulated in the rights issue process.