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A Study on Internet Chinese Companies’ Response to “The Holding Foreign Companies Accountable Act”

In: Proceedings of the 2023 3rd International Conference on Financial Management and Economic Transition (FMET 2023)

Author

Listed:
  • Guowei Chen

    (Jiangxi University of Finance and Economics, Accounting Institute)

  • Shulin Ruan

    (Shanghai Maritime University, School of Economics and Management)

  • Xiaotong Wang

    (Changsha University of Science & Technology, School of Economics and Management)

Abstract

At the beginning of the 21st century, a large number of Chinese companies went public in the United States due to many advantages such as easier access to financing, better corporate governance structure, and different listing conditions. However, in January 2020, with the disclosure of a short-selling report on Luckin Coffee’s year-long financial data falsification and fraud, Luckin Coffee’s trading was officially suspended on NASDAQ in June 2020, accompanied by a high level of concern from international capital markets about Chinese stocks. Within the following year, the US Senate introduced the Foreign Company Accountability Act, which tightened securities market regulations at the legal level and raised the threshold for companies from “unenforceable inspection” regions, including China, to list in the US. Data shows that more than 90% of the listed companies facing mandatory delisting as a result of the Foreign Company Accountability Act are Chinese companies. This paper provides a preliminary behavioral analysis of Chinese stocks by examining the paths taken by several Chinese stocks in response to the conflicting effects of the Foreign Company Accountability Act and the Chinese corporate system, and the subsequent results achieved.

Suggested Citation

  • Guowei Chen & Shulin Ruan & Xiaotong Wang, 2024. "A Study on Internet Chinese Companies’ Response to “The Holding Foreign Companies Accountable Act”," Advances in Economics, Business and Management Research, in: Vilas Gaikar & Min Hou & Yan Li & Yan Ke (ed.), Proceedings of the 2023 3rd International Conference on Financial Management and Economic Transition (FMET 2023), pages 95-109, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-272-9_11
    DOI: 10.2991/978-94-6463-272-9_11
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