Chapter 4

How Much Do We Trust Disclosed Information?

Investment Protection in Relation-Based Markets

In the late 1990s, at a conference on how to invest in China, a senior analyst from Hong Kong lamenting the poor quality of information disclosure among the listed firms in China joked that “reading the annual reports of the Chinese companies is like going to a bikini fashion show—what you see is interesting, but what you don’t see is vital!”

While it is well known that accurate financial information is vital for making investment decisions (such as purchasing shares of a company), what is less known is how people protect their investment when publicly disclosed information is not trustworthy. In this chapter, we will discuss information and ...

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