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Does legal protection affect firm value? Evidence from China’s stock market

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  • Rong Xu
  • Xingmei Xu
  • Junyan Zhang
  • Conggang Li

Abstract

We examine the question of whether firms derive value in areas with higher legal protection by studying how the difference among regional legal protection levels affects capital market reactions to firms receiving administrative penalty in China. The results show that the level of legal protection has a positive effect on the market reaction to administrative penalty announcements, and the effect is attenuated by non‐state ownership. Furthermore, we find evidence of higher efficiency of law enforcement in regions with higher level of legal protection.

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  • Rong Xu & Xingmei Xu & Junyan Zhang & Conggang Li, 2021. "Does legal protection affect firm value? Evidence from China’s stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 51-70, March.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:1:p:51-70
    DOI: 10.1111/acfi.12555
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    References listed on IDEAS

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    Cited by:

    1. Shiyu Wu & Xinyi Li & Xiaosen Du & Zexin Li, 2022. "The Impact of ESG Performance on Firm Value: The Moderating Role of Ownership Structure," Sustainability, MDPI, vol. 14(21), pages 1-22, November.

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