This paper aims to explore the relationship between information asymmetry and stock momentum. Using winner and loser approach, we find that winners with exaggerated forecast of earnings per share are more likely to have contrarian profits in subsequent holding periods. On the contrary, winners with low or middle-low information asymmetry tend to continue their good returns in future holding periods. In addition, the losers with middle information asymmetry achieve the highest contrarian profits, which may be called "white lie effects."

PurposeThis research examines how macroeconomic variables can precisely predict bull/bear stock markets in China and Taiwan.Design/methodology/approachThis paper adopts a two-state Markov switching model to characterize the bull and bear markets spanning from 1994 to 2019 and then conduct a bear stock market predictability test by running regressions between the filtered probabilities of bear markets and a series of macroeconomic variables in turn at different horizons of 1, 3, 6, 12 and 24 months.FindingsThis paper shows that inflation rates, changes in real exchange rates, and foreign currency reserve growth are key predictors of bear markets in China, while term spreads, unemployment rates and foreign reserve growth are major factors that can predict bear markets in Taiwan. Remarkably, industrial production growth does not have predictive power for bear markets, which may suggest emerging markets are driven by fund flows rather than real economic activities. Besides, the impact directions of foreign currency reserve growth are opposite, which may be due to different proportions of the financial accounts in their balance of payments.Practical implicationsIn practical respect, this paper provides market participants the usefulness, impact direction and implications of bear market predictors when building their market-timing strategies in China and Taiwan stock markets. The government institutions may also thereby make appropriate policies to prevent huge stock market downturns and serious drawbacks.Originality/valueIt highlights the “fund-driven market hypothesis” and “foreign currency reserve effects” that commonly dominate Taiwan and China stock markets since both are highly affected by international funds.

This study aims to examine how the social networks of top management affect the recovery of their companies when facing a financial crisis. We mainly use the logit and Cox regression models to investigate whether social networks help overcome the financial distress and shorten the crisis duration. The empirical findings suggest that companies with characteristics of low degree centrality of the chairman’s bank networks and high closeness centrality of the general manager’s general networks and bank networks are more likely to overcome financial distress and get back to normal status. Furthermore, for companies with characteristics of low degree centrality of the chairman’s personal general networks, low closeness centrality of the financial executive’s personal general networks, and high degree centrality of the financial executive’s personal bank networks, it was easier to shorten the crisis duration. The practical implication is that companies need to prioritize quality over quantity in order to survive or shorten the crisis. All company top managers should not look only at the size of the company but consider how the social network is configured.

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