Abstract
This paper investigates the trading activities of two distinct classes of shareholders, namely, the Chinese domestic investors and the foreign investors in the segmented Chinese A-share and B-share markets, respectively. Based on the results of our event study, we document prominent volatility and trading volumes during the windows of earnings announcements. The market reaction is more intensive in the A-share market and takes place much earlier before the public release of information. Furthermore, the abnormal trading volumes without price changes in advance of the public disclosure support the hypothesis of existing information among the A-share investors. This manifests information leakage and suggests an informal information environment in the A-share market. We further classify the earnings announcements into good news and bad news, and find that different information does not bring about different reaction patterns for the A shares. Insider trading, speculation and over-optimistic prospects for the economy in the A-share market are possible explanations