IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v88y2023icp442-457.html

The impact of differential risk disclosures: Evidence from cross-listed firms in China and Hong Kong

Author

Listed:
  • Brockman, Paul
  • Gao, Xi
  • Li, Xu
  • Xu, You

Abstract

We hand-collect and process mandatory risk disclosures from the annual reports of firms that are cross-listed in both the Chinese and Hong Kong stock markets from 2009 to 2015. We examine differential risk disclosure practices and find that the Hong Kong-based annual reports include risk disclosures that are significantly more negative than the Chinese-based annual reports for the same cross-listed firms. During this period, the Chinese regulatory authorities mandated an increase in the risk disclosures of these cross-listed firms. We then compare the impact of this 2012 regulatory change on Hong Kong investors with that of Chinese investors for the same cross-listed firms. Our results show that Hong Kong investors are more likely to improve their risk perceptions following the enhanced mandatory disclosures than their Chinese counterparts. Overall, our findings suggest that changes in mandatory risk disclosures will have significantly different effects on distinct investor groups.

Suggested Citation

  • Brockman, Paul & Gao, Xi & Li, Xu & Xu, You, 2023. "The impact of differential risk disclosures: Evidence from cross-listed firms in China and Hong Kong," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 442-457.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:442-457
    DOI: 10.1016/j.iref.2023.06.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056023001946
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2023.06.026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Ke, Bin & Huddart, Steven & Petroni, Kathy, 2003. "What insiders know about future earnings and how they use it: Evidence from insider trades," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 315-346, August.
    2. Klein, Roger W. & Bawa, Vijay S., 1976. "The effect of estimation risk on optimal portfolio choice," Journal of Financial Economics, Elsevier, vol. 3(3), pages 215-231, June.
    3. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    4. Giannini, Robert & Irvine, Paul & Shu, Tao, 2019. "The convergence and divergence of investors' opinions around earnings news: Evidence from a social network," Journal of Financial Markets, Elsevier, vol. 42(C), pages 94-120.
    5. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    6. Richard Lambert & Christian Leuz & Robert E. Verrecchia, 2007. "Accounting Information, Disclosure, and the Cost of Capital," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 45(2), pages 385-420, May.
    7. Ke, Bin & Ramalingegowda, Santhosh, 2005. "Do institutional investors exploit the post-earnings announcement drift?," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 25-53, February.
    8. Bushee, BJ & Noe, CF, 2000. "Corporate disclosure practices, institutional investors, and stock return volatility," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 38, pages 171-202.
    9. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    10. Kevin C. Smith & Eric C. So, 2022. "Measuring Risk Information," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 60(2), pages 375-426, May.
    11. repec:bla:jfinan:v:59:y:2004:i:4:p:1553-1583 is not listed on IDEAS
    12. Yang Bao & Anindya Datta, 2014. "Simultaneously Discovering and Quantifying Risk Types from Textual Risk Disclosures," Management Science, INFORMS, vol. 60(6), pages 1371-1391, June.
    13. Jesse A. Ellis & C. Edward Fee & Shawn E. Thomas, 2012. "Proprietary Costs and the Disclosure of Information About Customers," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 50(3), pages 685-727, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gu, Xiang & He, Xiqiong & Liu, Hao, 2025. "Risk information disclosure effect on IPO pricing efficiency: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 103(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John L. Campbell & Hsinchun Chen & Dan S. Dhaliwal & Hsin-min Lu & Logan B. Steele, 2014. "The information content of mandatory risk factor disclosures in corporate filings," Review of Accounting Studies, Springer, vol. 19(1), pages 396-455, March.
    2. John L. Campbell & Hye Seung “Grace” Lee & Hsin‐Min Lu & Logan B. Steele, 2020. "Express Yourself: Why Managers' Disclosure Tone Varies Across Time and What Investors Learn From It," Contemporary Accounting Research, John Wiley & Sons, vol. 37(2), pages 1140-1171, June.
    3. Mouselli, Sulaiman & Jaafar, Aziz & Hussainey, Khaled, 2012. "Accruals quality vis-à-vis disclosure quality: Substitutes or complements?," The British Accounting Review, Elsevier, vol. 44(1), pages 36-46.
    4. Carmelo Reverte, 2012. "The Impact of Better Corporate Social Responsibility Disclosure on the Cost of Equity Capital," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 19(5), pages 253-272, September.
    5. Bin Ke & Kathy Petroni, 2004. "How Informed Are Actively Trading Institutional Investors? Evidence from Their Trading Behavior before a Break in a String of Consecutive Earnings Increases," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 42(5), pages 895-927, December.
    6. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    7. Kevin Smith, 2024. "Risk information, investor learning, and informational feedback," Review of Accounting Studies, Springer, vol. 29(1), pages 237-275, March.
    8. Zhao, Lei, 2025. "Redacted disclosure and analysts’ weighting of information," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(2).
    9. Suresh Nallareddy & Maria Ogneva, 2017. "Accrual quality, skill, and the cross-section of mutual fund returns," Review of Accounting Studies, Springer, vol. 22(2), pages 503-542, June.
    10. Todd Kravet & Volkan Muslu, 2013. "Textual risk disclosures and investors’ risk perceptions," Review of Accounting Studies, Springer, vol. 18(4), pages 1088-1122, December.
    11. Wang, Yonghai & Wang, Gaomiao, 2025. "Risk management disclosure and risk premia of commercial banks in China: evidence from global systemic importance assessment indicators," Global Finance Journal, Elsevier, vol. 67(C).
    12. Lijuan Zhang & Mark Wilson, 2018. "Does the accruals quality premium arise from information risk?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(2), pages 599-632, June.
    13. Xu, Mingli & Yang, Wei & Huang, Zhixiong, 2021. "Do investor relations matter in the tourism industry? Evidence from public opinions in China," Economic Modelling, Elsevier, vol. 94(C), pages 923-933.
    14. Gary McCormick & Dan W. French, 2016. "Effects of frequent information disclosure: the case of daily net asset value reporting for closed-end investment companies," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 107-122, January.
    15. Santhosh Ramalingegowda, 2014. "Evidence from impending bankrupt firms that long horizon institutional investors are informed about future firm value," Review of Accounting Studies, Springer, vol. 19(2), pages 1009-1045, June.
    16. Skaife, Hollis A. & Veenman, David & Wangerin, Daniel, 2013. "Internal control over financial reporting and managerial rent extraction: Evidence from the profitability of insider trading," Journal of Accounting and Economics, Elsevier, vol. 55(1), pages 91-110.
    17. Terry Shevlin, 2013. "Some personal observations on the debate on the link between financial reporting quality and the cost of equity capital," Australian Journal of Management, Australian School of Business, vol. 38(3), pages 447-473, December.
    18. Michelle Hutchens & Sonja O. Rego & Brian Williams, 2024. "The impact of standard setting on individual investors: evidence from SFAS 109," Review of Accounting Studies, Springer, vol. 29(2), pages 1407-1455, June.
    19. Osswald, Benjamin, 2018. "Corporate tax planning and firms' information environment," arqus Discussion Papers in Quantitative Tax Research 236, arqus - Arbeitskreis Quantitative Steuerlehre.
    20. Christian Leuz & Catherine Schrand, 2009. "Disclosure and the Cost of Capital: Evidence from Firms' Responses to the Enron Shock," NBER Working Papers 14897, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:442-457. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.