The Relationship Between Market Reaction To Earnings News And Ownership Structure

The market efficiency theory believes that the prices of stocks reflect information, since valuable information could change investors'expectation and then cause market reaction. Among the information which published by corporations, earning news is the most concerned, the most sensitive, and the most meaningful. During the period of publishing earning news, the prices of stocks usually wave obviously. The ownership structure is the most critical factor of corporation management, because it determines the management structure and affect the corporations'decisions and their reflection.This paper examines quarterly earning news of corporations on Hu-Shen 300 during the period from 2001 to 2005, and tries to explain the price reaction and volume reaction by the ownership structure, the corporation finance and expectation of investors. This paper also examines the relationship between ownership structure and the informational efficiency on Chinese stock market, then offer the basis of ownership structure refine strategy and ownership structure departure revolution.Empirical results show that the ownership structure of listed corporations on Chinese stock market have distinct characteristic: complex components, high concentration of ownership, big proportion of state-owned shares, small proportion of shares in circulation. The market reaction of quarterly negative earning news, its CAR is not overall negative, and significantly negatively correlated with the proportion of the state-owned shares, significantly positively correlated with the proportion of corporate shares, not significantly correlated with the shares in circulations and the degree of ownership concentration. The abnormal trading volume is significantly positively correlated with the absolute value of CAR, significantly negatively correlated with net asset per share, not significantly correlated with ownership structure. This means that the higher of the proportion of state-owned shares, the lower vulnerable to the lack of market response and informational efficiency. The higher of the proportion of corporate shares of listed companies, the stock price the more sensitive with earning news, and the earning news have obvious effects. The informational efficiency of earning news is not really related with the proportion of shares in circulations and several major shareholding ratio. The change of trading volume during the earning news publishing period is not directly related with the listed companies'ownership structure.