A Comparison of China's Main Board and Growth Enterprise Market Board — Market Microstructure Approach

We compare the market quality of the newly established, second board of the China stock market, the Growth Enterprise Market (GEM) with the Main Board, and examine its impact on the Main Board from the market microstructure perspective. Using the newly available transaction level data, several findings emerge. First, trading activities of the Main Board stocks increase after the introduction of GEM Board, suggesting that the establishment of GEM is not at the expense of the Main Board but instead enhance the overall trading activities in China. Pricing error variances are not different in the two Boards, while GEM stocks have larger adverse selection cost component of bid-ask spread and higher probability of information-based trading which indicate a larger information asymmetry among traders, on average in GEM stocks than those in the Main Board. Interestingly, we find that the 15 min returns of Main Board stocks strongly lead that of GEM stocks but the GEM board only weakly leads Main Board, evidencing information transmission from the Main Board to the GEM. Overall, our findings suggest that the market quality of the GEM is sufficiently good to provide an important, alternative listing venue for high potential firms in China.

Download Full-text

The Impact of Fair Value Measurement for Bank Assets on Information Asymmetry and the Moderating Effect of Own Credit Risk Gains and Losses

The Accounting Review ◽

10.2308/accr-52070 ◽

2018 ◽

Vol 93 (6) ◽

pp. 127-147 ◽

Cited By ~ 5

Author(s):

Joana C. Fontes ◽

Argyro Panaretou ◽

Kenneth V. Peasnell

Keyword(s):

Credit Risk ◽

Information Asymmetry ◽

Fair Value ◽

Data Availability ◽

Bid Ask Spread ◽

Fair Value Measurement ◽

Gains And Losses ◽

Value Measurement ◽

The Impact

ABSTRACT We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry, and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments. Data Availability: All data are available from public sources.

Download Full-text

Does audit firm size contribute to audit quality? Evidence from two emerging markets

Corporate Ownership and Control ◽

10.22495/cocv11i2p8 ◽

2014 ◽

Vol 11 (2) ◽

pp. 108-119 ◽

Cited By ~ 3

Author(s):

Chen-Chin Wang ◽

Fan-Hua Kung ◽

Kai-Hsun Lin

Keyword(s):

Emerging Markets ◽

Earnings Management ◽

Information Asymmetry ◽

Audit Quality ◽

Discretionary Accruals ◽

Audit Firm ◽

Bid Ask Spread ◽

Audit Firms ◽

Quality Evidence

This study investigated whether the Big N audit firms in emerging markets can provide audits of high quality and mitigate information risk, by comparing the audit quality of Big N audit firms in Taiwan with those in China. The two countries share a similar cultural background and engage in frequent economic exchange; however, they have different legal systems and institutional environments. This study followed previous research in the use of bid-ask spread and discretionary accruals as proxy variables for information asymmetry and audit quality. Our results indicate that politico-economic differences between Taiwan and China influence the effectiveness of independent auditors when it comes to the mitigation of information asymmetry. Big N audit firms in Taiwan helped to mitigate information asymmetry and provided audit services of higher quality, whereas Big N firms in China were better able to constrain earnings management. Our results indicate that market concentration and market share have a stronger influence on reputation incentive and audit quality than does the size of an audit firm.

Download Full-text

Reassessing the Impact of Option Introductions on Market Quality: A Less Restrictive Test for Event-Date Effects

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109000003495 ◽

2007 ◽

Vol 42 (4) ◽

pp. 1041-1062 ◽

Cited By ~ 33

Author(s):

Bartley R. Danielsen ◽

Bonnie F. van Ness ◽

Richard S. Warr

Keyword(s):

Selection Criterion ◽

Hazard Model ◽

Market Quality ◽

Quality Changes ◽

Bid Ask Spread ◽

Event Date ◽

Option Listing ◽

Underlying Stocks ◽

The Impact

AbstractPrior research concludes that option introductions improve the average liquidity of the underlying stocks. We develop an improved, generalizable test to assess whether market quality changes occur on or near an event date. Applying this method to option listing events, we conclude that options do not systematically improve the market quality of the underlying security; rather, the market quality of the underlying security improves before the listing decision. Hazard model tests indicate that improving liquidity is a selection criterion in the option listing decision. Moreover, these tests suggest that the size of a stock's bid-ask spread is the single most important option listing determinant.

Download Full-text