Takeover possibility and market response to loss news under Chinese ST delisting regulation

Henry He Huang, Sakthi Mahenthiran and Xiaonong Zhang

Asia-Pacific Journal of Accounting & Economics, 2013, vol. 20, issue 2, 101-117

Abstract: This study examines whether the market reaction to firms' second consecutive loss news is influenced by the firms' likelihood of being taken over. Firms with two consecutive losses in China are subject to the "special-treatment (ST)" delisting regulation. We have two important findings. First, ST firms with certain characteristics (i.e. smaller firms with lower beta, lower accounting performance, higher leverage, and larger ownership concentration) are more likely to be taken over. Second, the market returns for the second consecutive loss news are higher for firms with a higher likelihood of being taken over.

Date: 2013
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DOI: 10.1080/16081625.2012.667386

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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