Information Asymmetry, East-West Cultural Differences, and Divergence in Investor Reactions

Seungho Lee; Thomas Walker; Aoran Zhang; Yunfei Zhao

doi:10.1111/eufm.12388

Information Asymmetry, East-West Cultural Differences, and Divergence in Investor Reactions

Seungho Lee^* (Corresponding Author), Thomas Walker, Aoran Zhang, Yunfei Zhao^* (Corresponding Author)

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

Abstract

This paper investigates the divergence in investor behavior between the U.S. and China following the abolition of the Chinese presidential term limit in 2018, which may, in part, have reflected the heterogeneous opinions expressed in public online media regarding this event. Compared with Chinese investors, the sentiment among U.S. investors was considerably more pessimistic. Accordingly, we find that Chinese companies listed in the U.S. significantly underperformed relative to a sample of propensity score matched firms listed in China. Additionally, we find that the political connectedness of firms to the Chinese government strongly influenced the stock prices of U.S-listed Chinese firms.

Original language	English
Pages (from-to)	1191-1217
Number of pages	27
Journal	European Financial Management
Volume	29
Issue number	4
Early online date	9 Aug 2022
DOIs	https://doi.org/10.1111/eufm.12388
Publication status	Published - 1 Sept 2023

Bibliographical note

Funding Information:
We are grateful to the editor, Dr. John A. Doukas, and an anonymous referee for their valuable comments. In addition, we thank Sanjay Banerji, Denis Schweizer, Frederick Davis, Gady Jacoby, Hamed Khadivar, Lorne Switzer, Maher Kooli, as well as participants of the 32nd Australasia Finance and Banking Conference (Sydney, Australia) and the 2020 Cross Country Perspectives in Finance (CCPF) Conference for helpful comments and suggestions. We are grateful to Stephen and Naomi Miller for helpful comments and suggestions and to Kalima Vico for excellent research assistance. This study was funded by Concordia's Office of the Vice President, Research & Graduate Studies (OVPRGS). A previous version of this paper was entitled ‘Information Asymmetry, Cultural Difference, and Divergence in Investor Reactions: Empirical Evidence from the Chinese and U.S. Stock Markets’. Consistent with EFM guidelines, authors are listed in alphabetical order.

Data Availability Statement

The data that support the findings of this study are available from the corresponding authors upon reasonable request.

Keywords

equity market
political connections
China
United States
presidential term limit abolition

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10.1111/eufm.12388Licence: CC BY-NC-ND

Lee_etal_EFM_Information_Asymmetry_East_VoR
© 2022 The Authors. European Financial Management published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. https://creativecommons.org/licenses/by-nc-nd/4.0/
Final published version, 2.46 MBLicence: CC BY-NC-ND

Cite this

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Information Asymmetry, East-West Cultural Differences, and Divergence in Investor Reactions

Abstract

Bibliographical note

Data Availability Statement

Keywords

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