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Perks and the informativeness of stock prices in the Chinese market

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

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0929119911000940
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Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 17 (2011)
Issue (Month): 5 ()
Pages: 1410-1429

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Handle: RePEc:eee:corfin:v:17:y:2011:i:5:p:1410-1429
DOI: 10.1016/j.jcorpfin.2011.07.005
Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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