Information Asymmetry, East-West Cultural Differences, and Divergence in Investor Reactions

Seungho Lee* (Corresponding Author), Thomas Walker, Aoran Zhang, Yunfei Zhao* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper investigates the divergence in investor behavior between the U.S. and China following the abolition of the Chinese presidential term limit in 2018, which may, in part, have reflected the heterogeneous opinions expressed in public online media regarding this event. Compared with Chinese investors, the sentiment among U.S. investors was considerably more pessimistic. Accordingly, we find that Chinese companies listed in the U.S. significantly underperformed relative to a sample of propensity score matched firms listed in China. Additionally, we find that the political connectedness of firms to the Chinese government strongly influenced the stock prices of U.S-listed Chinese firms.
Original languageEnglish
Pages (from-to)1191-1217
Number of pages27
JournalEuropean Financial Management
Issue number4
Early online date9 Aug 2022
Publication statusPublished - 1 Sept 2023

Bibliographical note

Funding Information:
We are grateful to the editor, Dr. John A. Doukas, and an anonymous referee for their valuable comments. In addition, we thank Sanjay Banerji, Denis Schweizer, Frederick Davis, Gady Jacoby, Hamed Khadivar, Lorne Switzer, Maher Kooli, as well as participants of the 32nd Australasia Finance and Banking Conference (Sydney, Australia) and the 2020 Cross Country Perspectives in Finance (CCPF) Conference for helpful comments and suggestions. We are grateful to Stephen and Naomi Miller for helpful comments and suggestions and to Kalima Vico for excellent research assistance. This study was funded by Concordia's Office of the Vice President, Research & Graduate Studies (OVPRGS). A previous version of this paper was entitled ‘Information Asymmetry, Cultural Difference, and Divergence in Investor Reactions: Empirical Evidence from the Chinese and U.S. Stock Markets’. Consistent with EFM guidelines, authors are listed in alphabetical order.

Data Availability Statement

The data that support the findings of this study are available from the corresponding authors upon reasonable request.


  • equity market
  • political connections
  • China
  • United States
  • presidential term limit abolition


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