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Unveiling the Brew: Probing the Lingering Impact of the Luckin Coffee Scandal on the Liquidity of Chinese Cross-Listed Stocks

Author

Listed:
  • Lee Kersting

    (Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA)

  • Jang-Chul Kim

    (Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA)

  • Sharif Mazumder

    (Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA)

  • Qing Su

    (Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA)

Abstract

This paper investigates the impact of the Luckin Coffee accounting scandal on stock liquidity and spillover effects in the financial market, focusing on Chinese companies listed on U.S. exchanges. Utilizing event studies, we analyze eight pivotal events related to the scandal to examine stock liquidity and market quality changes. The results show a significant decline in Luckin’s stock liquidity during the scandal, while spillover effects on other Chinese stocks are limited. Comparisons with the Satyam accounting scandal suggest that individual company scandals may not substantially affect the liquidity of other stocks from the same country. The findings highlight the importance of robust regulatory frameworks and investor due diligence in safeguarding market integrity and restoring investor confidence.

Suggested Citation

  • Lee Kersting & Jang-Chul Kim & Sharif Mazumder & Qing Su, 2024. "Unveiling the Brew: Probing the Lingering Impact of the Luckin Coffee Scandal on the Liquidity of Chinese Cross-Listed Stocks," JRFM, MDPI, vol. 17(11), pages 1-12, November.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:11:p:514-:d:1522473
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    References listed on IDEAS

    as
    1. Mazumder, Sharif & Saha, Pritam, 2021. "COVID-19: Fear of pandemic and short-term IPO performance," Finance Research Letters, Elsevier, vol. 43(C).
    2. Aigbe Akhigbe & Jeff Madura & Anna Martin, 2005. "Accounting contagion: The case of Enron," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(2), pages 187-202, June.
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