Abstract
This article analyzes the effects of rumor and official rumor clarification on Chinese stock returns under different rumor conditions using an event study. The results are based on a sample of 832 rumor clarification announcements from China Listed Companies spanning the period of 2015 to 2017. The results show that the average cumulative abnormal return after the rumor event is significantly positive in the positive rumor sample and neutral sample, and significantly negative in the negative rumor sample. After the clarification announcements, we find the announcements effective for the positive and neutral rumor sample, but not in the case of the negative sample. However, by comparing different clarification times of each sample, we find that the earlier the clarification time is, the smaller the impact on the companies in positive and negative rumor examples.
Highlights
It is difficult to dispute that rumors have an important influence on corporate value, namely stock prices
This study has examined the responses of stock price to rumors and official announcements of rumor clarification with China Listed Companies spanning the period of 2015-2017
In addition to the types of different rumors and the types of rumor clarifications, this information will increase the market value of the firm and the effect changes over time
Summary
It is difficult to dispute that rumors have an important influence on corporate value, namely stock prices. The Internet has proven a productive incubator of rumors (Van Bommel, 2003). Rumors can spread through word of mouth or newsletters. Kapferer defines a rumor as the emergence and spreading of information in a societal organism that either has not been yet publicly confirmed or been denied by official sources (Kapferer, 1996). The influence of rumors on the company has been increasingly concerned by researchers and practitioners. The rumors of listed companies caused abnormal volatility in stock prices (Lim and Kong, 2004), increased the operating risk of listed companies (Kiymaz, 2002), and had a certain impact on the stability of the securities market
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