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

Jiaxin Duan, Lei Lu, Yixin Wei and Fangyi Yin

Accounting and Finance, 2025, vol. 65, issue 3, 2454-2486

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.

Date: 2025
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