Changes in market segmentation and the flow of information: Some evidence from China

I study market behavior around earnings releases for Chinese stocks, emphasizing the opening of the B share market to PRC investors on February 19th 2001. Before then, abnormal pre-announcement trading volume in the A share market (restricted to locals) suggests inside information, while announcement period return and volume responses suggest “disagreement” in B and H share trading (restricted to foreigners). After that, B share market behavior more closely resembles A share trading. Similar changes are not observed in a “control”, the H share market, which remains closed to PRC investors. There is little evidence that the change in pre-announcement activity in the B share market affects relative B and A prices or reflects superior information about corporate performance.