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The leaders' shadow: Excessive information spillover in the Chinese stock market

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  • Jiaxin Duan
  • Lei Lu
  • Yixin Wei
  • Fangyi Yin

Abstract

This study investigates information spillover from industry leaders to peer firms during the leaders' earnings announcements (EAs) in the Chinese stock market. We find a positive information spillover, which is subsequently corrected when peers announce their own earnings, indicating excessive information spillover (overreaction). We further identify several reasons for the overreaction: (1) investors' overweighing of leaders' earnings in evaluating peers' earnings; (2) investors' abnormal searching and trading behaviours, particularly among retail investors; and (3) peer firms' poor information environment and limits to arbitrage. These findings suggest that overreaction could be more prominent in less mature, retail investor‐dominated markets like China.

Suggested Citation

  • Jiaxin Duan & Lei Lu & Yixin Wei & Fangyi Yin, 2025. "The leaders' shadow: Excessive information spillover in the Chinese stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(3), pages 2454-2486, September.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:3:p:2454-2486
    DOI: 10.1111/acfi.70003
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