Common ownership and the spillover effect of market reaction: Evidence from stock exchange comment letters

Qijian Wang and Kaiguo Zhou

Pacific-Basin Finance Journal, 2022, vol. 73, issue C

Abstract: Currently, there is a debate on the impact of common ownership. Some researchers find common ownership leads to increased cooperation and decreased competition among common-held firms while other studies show that there is no robust evidence showing the effect of common ownership. In this paper, by applying the receipt of stock exchange comment letters as an exogenous shock for common-held firms, we find the following results on the capital market's reaction to comment letters on common ownership: 1) there exists a significant spillover effect of the market reaction. Not only the firms receiving comment letters experience negative abnormal returns, but also their cross-held firms; 2) the spillover effect is caused through the mechanism of corporate governance as the effect is more pronounced for firms with poor corporate governance; 3) there exists heterogeneous characteristics on the spillover effect for different firms since the state-owned enterprises are less likely to be affected by the comment letters. The findings can provide regulators, investors, and managers a better understanding on the role of common ownership.

Keywords: Common ownership; Market reaction; Comment letters; Corporate governance (search for similar items in EconPapers)
JEL-codes: G12 G14 G34 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000245

DOI: 10.1016/j.pacfin.2022.101729

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