Does the market care about investor protection practices in China?

Yan-Leung Cheung, Yin Dang, Ping Jiang, Tong Lu, Weiqiang Tan
2017 Applied Economics  
This study develops a scorecard with which to measure the investor protection practices of major listed firms in China during 2007-2010. We use time-series data to examine the relationship between the change in firm investor protection practices and market performance. Results show that firms exhibiting improvements in investor protection practices manifest a subsequent increase in buy-and-hold abnormal returns. Results further indicate that the changes in the sub-index have different effects
more » ... different effects on a firm's future performance. Shareholder rights to be rewarded seem to have the most significant and positive effect on a firm's future performance for both local and international investors. Moreover, international investors pay attention to their rights to information. Results provide evidence in support of the notion that the market does care about firm's investor protection practices. Our results are robust to othermeasures of firm performance.
doi:10.1080/00036846.2017.1324612 fatcat:uv3ngxup7vgxdao7pdny3bmgyq