China’s stock markets have become the second largest in the world after that
of the United States. Both the Chinese institutional setting and the behaviors of
the populous Chinese investors and listed firms provide novel opportunities to
explore the classical theories in the field of economics and finance. Using two
natural experiments, this thesis attempts to shed new light on these theories.
The local bias puzzle was originally proposed from the analysis of investors’
investment portfolios. In the first essay, I test and confirm the hypothesis that
local bias has already existed in investor attention subconsciously regardless of
their investment. In contrast to literature which focuses on investment accounts, I
examine local bias in investor attention by analyzing investor messages posted on
China’s Internet stock message boards. I find that individual investors pay more
attention to the stocks of local companies. This finding is strong and robust to
local-bias proxy variables. By examining factors that affect investor attention
local bias, I find that local bias is particularly strong in underdeveloped regions,
for SOEs, for small-investor base and low-turnover stocks, and for stocks with
name indicating locality. Furthermore, distance plays a significant role: the
marginal effect of local bias is much stronger for distances within 500 kilometers.
All these results are consistent with my explanation that local bias is affected by
factors which can attract investors’ attention. Thus, investment local bias is the
natural consequence of investor attention local bias, and I attribute the local bias
puzzle to limited investor attention.
Chinese stock market has plunged into an unlocking flood of non-tradable
shares since June 2006. This radical transition provides a unique natural
experimental setting to ascertain earnings management incentives. In the second
essay, I explore whether earnings management behavior exists in listed Chinese
firms during the unlocking process. I find that non-tradable shareholders
opportunistically manipulate earnings upward to offset price pressures for
subsequent selling. Firms have higher levels of accruals when unlocking incentive
is higher. Furthermore, actual selling incentive is higher in firms which have
higher levels of accruals. The results document a novel case that equity incentives
give rise to the incidence of earnings management. / published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy
| Identifer | oai:union.ndltd.org:HKU/oai:hub.hku.hk:10722/161571 |
| Date | January 2012 |
| Creators | Wu, Zhiguo, 吴志国 |
| Contributors | Qiu, H, Zhou, X |
| Publisher | The University of Hong Kong (Pokfulam, Hong Kong) |
| Source Sets | Hong Kong University Theses |
| Language | English |
| Detected Language | English |
| Type | PG_Thesis |
| Source | http://hub.hku.hk/bib/B48079765 |
| Rights | The author retains all proprietary rights, (such as patent rights) and the right to use in future works., Creative Commons: Attribution 3.0 Hong Kong License |
| Relation | HKU Theses Online (HKUTO) |
Page generated in 0.0175 seconds