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Perks and the informativeness of stock prices in the Chinese market

Author

Listed:
  • Gul, Ferdinand A.
  • Cheng, Louis T.W.
  • Leung, T.Y.

Abstract

While the literature shows that perks can affect firm values positively or negatively, we argue that firms with higher perks are more likely to be associated with a lower quality of financial reporting, which, in turn, can affect the informativeness of stock prices. Based on hand-collected data on perks from Chinese listed firms, we find that firms with lower perks are associated with higher informativeness of stock prices (or lower R-square). Moreover, the positive association between perks and R-square is shown to be weaker for firms with higher financial reporting quality through audit and earnings quality measures.

Suggested Citation

  • Gul, Ferdinand A. & Cheng, Louis T.W. & Leung, T.Y., 2011. "Perks and the informativeness of stock prices in the Chinese market," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1410-1429.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:5:p:1410-1429
    DOI: 10.1016/j.jcorpfin.2011.07.005
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    Cited by:

    1. Xu, Nianhang & Li, Xiaorong & Yuan, Qingbo & Chan, Kam C., 2014. "Excess perks and stock price crash risk: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 419-434.
    2. repec:eee:finlet:v:23:y:2017:i:c:p:179-189 is not listed on IDEAS
    3. Boubaker, Sabri & Mansali, Hatem & Rjiba, Hatem, 2014. "Large controlling shareholders and stock price synchronicity," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 80-96.
    4. Zhang, Min & Liu, Yaosong & Xie, Lu & Ye, Tingting, 2017. "Does the cutoff of “red capital” raise a red flag? Political connections and stock price crash risk," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 89-109.
    5. repec:eee:advacc:v:31:y:2015:i:1:p:68-79 is not listed on IDEAS
    6. Martin J. Conyon & Lerong He, 2016. "Executive Compensation and Corporate Fraud in China," Journal of Business Ethics, Springer, vol. 134(4), pages 669-691, April.
    7. Hua Zhang & Yuanyang Song & Yuan Ding, 2015. "What Drives Managerial Perks? An Empirical Test of Competing Theoretical Perspectives," Journal of Business Ethics, Springer, vol. 132(2), pages 259-275, December.
    8. Xu, Nianhang & Chen, Qinyuan & Xu, Yan & Chan, Kam C., 2016. "Political uncertainty and cash holdings: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 276-295.
    9. Huang, Paoyu & Ni, Yensen, 2017. "Board structure and stock price informativeness in terms of moving average rules," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 161-169.
    10. repec:eee:jiaata:v:24:y:2015:i:c:p:29-45 is not listed on IDEAS
    11. repec:eee:jbrese:v:86:y:2018:i:c:p:83-95 is not listed on IDEAS
    12. repec:eee:corfin:v:48:y:2018:i:c:p:244-260 is not listed on IDEAS

    More about this item

    Keywords

    Perks; Auditor quality; Earnings quality; R-square;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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