Management earnings forecasts, earnings announcements, and institutional trading in China

Stephen Y L CHEUNG, Xuandong Luo, Weiqiang TAN*, Tusheng Xiao

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    3 Citations (Scopus)

    Abstract

    In this study, we investigate the trading behavior of institutional investors in China according to management earnings forecasts (MEFs) and earnings announcements (EAs). MEFs are mandatory under the stringent regulatory framework in China. We find evidence that both MEFs and EAs have an effect on the market. However, MEFs have a bigger effect on the market than do EAs. According to a sample of semiannual observations of firms from 2003 to 2008, we find that changes in the stock ownership of institutions are positively associated with EAs but not significantly associated with MEFs. When we further examine the relations between institutional characteristics and trading strategies, we find that growth funds exploit the arbitrage opportunity of MEFs.

    Original languageEnglish
    Pages (from-to)184-203
    Number of pages20
    JournalEmerging Markets Finance and Trade
    Volume50
    DOIs
    Publication statusPublished - 2014

    Scopus Subject Areas

    • Finance
    • Economics, Econometrics and Finance(all)

    User-Defined Keywords

    • China
    • Earnings announcement
    • Institutional trading
    • Management earnings forecasts

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