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The Impact of Market Condition and Policy Change on the Sustainability of Intra-Industry Information Diffusion in China

Author

Listed:
  • Chi Dong

    (School of Economics, Hebei University, Baoding 071002, China)

  • Hooi Hooi Lean

    (Economics Program, School of Social Sciences, Universiti Sains Malaysia, Penang 11800, Malaysia)

  • Zamri Ahmad

    (School of Management, Universiti Sains Malaysia, Penang 11800, Malaysia)

  • Wing-Keung Wong

    (Department of Finance, Fintech Center, and Big Data Research Center, Asia University, Taichung City 41354, Taiwan
    Department of Medical Research, China Medical University Hospital, Taichung 40402, Taiwan
    Department of Economics and Finance, Hang Seng University of Hong Kong, Shatin 999077, Hong Kong)

Abstract

Through an investigation into seven major industries in China’s stock market from 2002 to 2013, this study focuses on two main external determinants: market condition and policy change on intra-industry information diffusion. We employ both time-series and panel Vector Auto-regression (VAR) methods on a sample data of 1175 firms for the analysis. The investigation reveals that market conditions and policy changes affect the process of intra-industry information diffusion in China. The speed of intra-industry information diffusion in a down-market state is slower than an upmarket, especially when the evidence is more significant in the longer horizon of the market condition. Policy changes, especially the split-share structure reform, impede the process of intra-industry information diffusion. The investigation outcome also reveals that there is an increasing delay in intra-industry information diffusion over time in China’s stock market after 2005. However, because of the decreasing information volatility of intra-industry information diffusion, policy changes are useful to a certain extent.

Suggested Citation

  • Chi Dong & Hooi Hooi Lean & Zamri Ahmad & Wing-Keung Wong, 2019. "The Impact of Market Condition and Policy Change on the Sustainability of Intra-Industry Information Diffusion in China," Sustainability, MDPI, vol. 11(4), pages 1-20, February.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:4:p:1037-:d:206584
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