Work

The leaders' shadow: Excessive information spillover in the Chinese stock market

Year: 2025

Type: article

Abstract: This study investigates information spillover from industry leaders to peer firms during the leaders' earnings announcements (EAs) in the Chinese stock market. We find a positive information spillover, which is subsequently corrected when peers announce their own earnings, indicating excessive information spillover (overreaction). We further identify several reasons for the overreaction: (1) investors' overweighing of leaders' earnings in evaluating peers' earnings; (2) investors' abnormal searching and trading behaviours, particularly among retail investors; and (3) peer firms' poor information environment and limits to arbitrage. These findings suggest that overreaction could be more prominent in less mature, retail investor‐dominated markets like China.

Source: Accounting and Finance

DOI: 10.1111/acfi.70003

Authors: Jiaxin Duan, Lei Lu, Yixin Wei, Fangyi Yin

Institutions: Macau University of Science and Technology, Peking University, Auckland University of Technology, Wenzhou-Kean University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,470

Funder: Macau University of Science and Technology Foundation