Ownership Structure and Corporate Earnings in China

T. Y. Leung

Chinese Economy, 2007, vol. 40, issue 5, 52-66

Abstract: The market setting of the Chinese securities markets is unique because of: (1) a mandatory requirement to release reported earnings within 120 days after the fiscal year ends; (2) a practice of announcing earnings and dividends simultaneously; and (3) a high percentage of shares in the hands of state-owned and legal-person shareholders. This article explores the relation between ownership structure, earnings performance, and announcement timing of Chinese listed firms. Overall results indicate that the percentage of nontradable shares is negatively related to announcement timeliness, and positively related to unexpected earnings increase, unexpected cash dividend increase, and firm size. Consistent with the findings of previous research, this study provides evidence that the market reacts favorably to early rather than late announcement. Firms with high percentages of nontradable shares are larger firms and have better earnings performance, and hence these firms tend to release earnings information earlier.

Date: 2007
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