China's diversification discount: The role of the information environment

Libo Yin and Ruxue Bai

International Review of Financial Analysis, 2023, vol. 88, issue C

Abstract: Based on information uncertainty, in this paper, we provide a mispricing explanation for the diversification discount in the Chinese A-shares market. The empirical evidence reveals an overestimation of a diversified company's value due to the uncertain information of such companies, and this overestimation is stronger when exacerbated by high sentiment. Moreover, we provide new evidence of the year breakpoint in the diversification discount during different sample subintervals, which relies on a change in ex post mispricing related to the macroeconomic environment.

Keywords: Diversification discount; Mispricing; Information uncertainty; Breakpoint (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:88:y:2023:i:c:s1057521923002041

DOI: 10.1016/j.irfa.2023.102688

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