Sustainability, Vol. 11, Pages 1037: The Impact of Market Condition and Policy Change on the Sustainability of Intra-Industry Information Diffusion in China (Sustainability)

Through an investigation into seven major industries in China’s stock market from 2002 to 2013, this study focuses on two main external determinants: market condition and policy change on intra-industry information diffusion. We employ both time-series and panel Vector Auto-regression (VAR) methods on a sample data of 1175 firms for the analysis. The investigation reveals that market conditions and policy changes affect the process of intra-industry information diffusion in China. The speed of intra-industry information diffusion in a down-market state is slower than an upmarket, especially when the evidence is more significant in the longer horizon of the market condition. Policy changes, especially the split-share structure reform, impede the process of intra-industry information diffusion. The investigation outcome also reveals that there is an increasing delay in intra-industry information diffusion over time in China’s stock market after 2005. However, because of the decreasing information volatility of intra-industry information diffusion, policy changes are useful to a certain extent.