What's in a “China” Name? A Test of Investor Attention Hypothesis

Authors

  • Kee-Hong Bae,

    1. Kee-Hong Bae is a Professor at the Schulich School of Business, York University in North York, Canada. Wei Wang is a Professor at the Queen's School of Business, Queen's University in Kingston, Canada.
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  • Wei Wang

    1. Kee-Hong Bae is a Professor at the Schulich School of Business, York University in North York, Canada. Wei Wang is a Professor at the Queen's School of Business, Queen's University in Kingston, Canada.
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  • We thank an anonymous referee, Bill Christie (Editor), Warren Bailey, Brad Barber, Zhi Da, Liyan Yang, Jason Wei, and seminar participants at HKUST, Seoul National University, York University, the FMA Annual Meeting (New York City), the China International Conference in Finance (Beijing), and the FMA Asian Conference (Singapore) for helpful comments. We thank Sharlene He and Hank Yang for their excellent research assistance. Wei Wang thanks the Queen's School of Business for financial support. All errors are our own.

Abstract

We study whether a firm's name affects investor attention and firm valuation. Some Chinese firms listed on US stock exchanges have the word “China” included in their company names (“China-name stocks”), while others do not (“non-China-name stocks”). During the 2007 China stock market boom, we find that China-name stocks significantly outperform non-China-name stocks. This is not due to differences in firm characteristics, risk, or liquidity. The “China-name effect” is largely consistent with the investor attention hypothesis that price pressure caused by increased investor attention on China-name stocks during the boom period drives up China-name stocks more than non-China-name stocks.

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