Abstract
Value-relevant bad news leads to declining stockholder wealth. Various factors moderate the decline. We explore the moderating effect of culture (country), economic development levels, and insider trading laws. To this effect, we compile rich bad news announcement data from the US, Japan, China, and India. Ours is the first such study to cover comprehensive data from multiple countries.
 Stock markets in the US, Japan, and India experience a significant stock decline following the public announcement of bad news. In contrast, companies traded in the Chinese stock market experienced a positive stock impact. Companies in countries with high long-term orientation (Japan and China) perform better than those with low long-term orientation (the US and India). Economic development levels also play a significant mediating role. Countries with stronger trading laws do not experience stock decline before the public announcement of disruptions. Our study enriches the current state of the art by performing a multi-country analysis of stock impact from bad news announcements. The results are of interest to investors and policymakers.
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