Abstract
As a major global exchange, the Stock Exchange of Hong Kong (SEHK) only requires semi-annual reporting whereas other major exchanges including the ones in Chinese mainland require quarterly reporting. We argue against the traditional view that higher reporting frequency is necessarily more beneficial. The decision on reporting frequency depends on how the information is being processed by the recipient traders and the results are not obvious. Using a sample of Chinese companies dual-listed in both China A share market and SEHK (AH shares) as the experimental group and mainland’s companies listed on SEHK (H shares) only as the control group, we apply the difference-in-difference (DID) method to investigate the impacts of reporting frequency on stock information quality. The results suggest that after China A share market require quarterly financial reporting for all listed companies in 2002, the information asymmetry of the H tranche of AH stocks increases. Different from prior studies, the results suggest a negative association between stock information quality and financial reporting frequency. We argue that the increased information asymmetry in the H tranche is caused by the noise spilled over from the A tranche. We conduct multivariable GARCH tests and find evidence supporting this conjecture.
Highlights
Most of the major exchanges in the global markets, including Chinese mainland, United States (US), Japan and Singapore, require that their listed companies report financial statements quarterly whereas public companies listed in Hong Kong still reports semi-annually
This study investigates the impacts of more frequent financial disclosure on information quality for stock price with a sample of AH and H shares of Chinese companies (H share) mainland firms
Controlling for company and market level variables, the results suggest that AH shares have higher information asymmetry than H shares in Period 2 and Period 3 but not Period 1, indicating that higher financial reporting frequency lead to lower information quality in the A share market
Summary
Most of the major exchanges in the global markets, including Chinese mainland (sometimes “mainland”), United States (US), Japan and Singapore, require that their listed companies report financial statements quarterly whereas public companies listed in Hong Kong still reports semi-annually. 00124, illiquidity of 0.32118 and return volatility of − 0.00113 in Period 1 indicate that before 2001, when both markets require semi-annual reporting, the information quality of the two types of stocks are not significantly different.
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