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The effects of trading rights and ownership structures on the informativeness of accounting earnings: Evidence from China’ split share structure reform

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  • Zhang, Li

Abstract

This paper examines how the removal of trading restrictions and ownership structures affect earnings informativeness by investigating the changes in the earnings-return relation around China’s split share structure reform. I find the reform has a negative impact on the relationship between controlling shareholders’ ownership and earnings informativeness, which is consistent with the idea that the removal of trading restrictions gives controlling shareholders incentives to influence the stock price through managing earnings. I also find that earnings informativeness decreases with the reduction in controlling shareholders’ ownership. This dilution effect is more significant for firms with non-state controlling shareholders or with controlling shareholders that are not monitored by other large shareholders. The results are consistent with the notion that controlling shareholders provide less informative earnings in response to the dilution of their ownership to avoid the constraints arising from the increased monitoring by outside investors.

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  • Zhang, Li, 2020. "The effects of trading rights and ownership structures on the informativeness of accounting earnings: Evidence from China’ split share structure reform," Research in International Business and Finance, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:riibaf:v:51:y:2020:i:c:s0275531919303770
    DOI: 10.1016/j.ribaf.2019.101110
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    2. Wang, Jiangyuan & Wang, Hua & Wang, Di, 2021. "Equity concentration and investment efficiency of energy companies in China: Evidence based on the shock of deregulation of QFIIs," Energy Economics, Elsevier, vol. 93(C).

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    More about this item

    Keywords

    Earnings informativeness; Trading rights; Ownership structure; Split share structure;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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