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

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  • 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
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    References listed on IDEAS

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    Keywords

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    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

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