DO INVESTORS EARN POSITIVE ABNORMAL RETURNS FROM INVESTING IN CHINESE FIRMS LISTED ON THE SINGAPORE EXCHANGE?

Abstract

This study examines whether investors can earn positive abnormal returns from Chinese firms listed on the Singapore Exchange. Abnormal returns are defined as returns over and above what an investor can earn from other comparable local firms. The listing of Chinese firms can enable investors to earn positive abnormal returns by giving them access to the phenomenal growth in China. However, these Chinese firms have been embroiled in a series of accounting scandals, which have caused their stock prices to decline and investor confidence in them to be undermined. We find that investors earn negative abnormal returns from investing in Chinese firms. We also find no significant relationship between the presence of an accounting irregularity and the Chinese firms' long-term underperformance.