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Margin trading and value relevance of earnings: Evidence from China

Author

Listed:
  • Zhang, Xiaotao
  • Yu, Yicun
  • Cao, Yi
  • Hao, Jing

Abstract

Information asymmetry and accounting information effectiveness are important issues in the capital market. Based on a sample of China's A-share listed companies from 2007 to 2021, this paper studies the impact of China's margin trading and short-selling policy on the value relevance of earnings and the unerlying mechanisms. We find that, compared with companies that are not included in margin trading and short selling lists, the earnings value relevance of listed companies increases significantly after allowing for short selling. In addition, margin trading and short selling improve the value relevance of earnings more significantly for firms with higher agency costs and firms with lower information transparency.

Suggested Citation

  • Zhang, Xiaotao & Yu, Yicun & Cao, Yi & Hao, Jing, 2024. "Margin trading and value relevance of earnings: Evidence from China," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000059
    DOI: 10.1016/j.frl.2024.104975
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