Working Paper: NBER ID: w21075
Authors: Chunxin Jia; Yaping Wang; Wei Xiong
Abstract: This paper uses the segmented dual-class shares issued by several dozen Chinese firms---A shares to local Chinese investors and H shares to foreign investors---to compare reactions of local and foreign investors to the same public news. We find that local investors react more strongly to earnings forecasts by local analysts, while foreign investors react more strongly to forecasts of foreign analysts. This finding highlights social trust as a force driving people with different social backgrounds to react differently to the same information.
Keywords: Social Trust; Investor Behavior; Public News; Earnings Forecasts; Local Investors; Foreign Investors
JEL Codes: F3; G02; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Social Trust (Z13) | Local Investors' Reaction to Local Analysts' Earnings Forecasts (G17) |
| Social Trust (Z13) | Foreign Investors' Reaction to Foreign Analysts' Earnings Forecasts (F21) |
| A-share Prices (G12) | H-share Prices (G19) |
| Local Investors' Reaction to Local Analysts' Earnings Forecasts (G17) | A-share Prices (G12) |
| Foreign Investors' Reaction to Foreign Analysts' Earnings Forecasts (F21) | H-share Prices (G19) |