Premium
The Volatility of Return Revisions and Financial Statement Literacy in Emerging Markets: The Case of Cross‐listed Chinese Firms
Author(s) -
Callen Jeffrey L.,
Lai Karen M.Y.,
Wei Steven X.
Publication year - 2016
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12180
Subject(s) - cash flow , monetary economics , equity (law) , volatility (finance) , economics , financial literacy , emerging markets , business , financial economics , financial statement , uncorrelated , accounting , finance , statistics , mathematics , political science , law , audit
Are foreign investors in emerging markets more financial statement literate than domestic investors? If so, this conjecture implies that foreign (domestic) investors are more likely to revise their return expectations to cash flow (discount rate) news. It also implies that cash flow news and discount rate news are likely to be uncorrelated when evaluating return revisions by domestic investors, whereas cash flow news and discount rate news are likely to be negatively correlated when evaluating return revisions by foreign investors. The Chinese equity markets yield robust empirical results that are consistent with both hypotheses.