The impact of the Lehman Brothers' bankruptcy on the performance of Chinese sectors

This paper investigates the impact of the news announcement of the Lehman Brothers??? (LBs???) bankruptcy on the performance of Shanghai Stock Exchange (SSE) sectors. Unlike the assumption in this literature that firms are homogenous, we address the unknown issue: does LBs??? bankruptcy have a heterogenous effect on stock returns of sectors listed on SSE? We employ an event study approach and use daily data for a total of 845 firms grouped into nine sectors, we find fresh results, previously undocumented in this literature. First, our results show that unlike the United States (see Ranjeeni 2014), Chinese Energy and Financial sectors were insignificantly affected from LBs??? bankruptcy. This implies that these sectors can provide cross-country diversification opportunities for US investors during volatile periods. Second, we find statistically insignificant effect of LBs??? bankruptcy on the performance of the financial sector while most of the other sectors suffered significantly. This implies that the Chinese market level analysis conducted by Bianconi et al. (2013) is influenced by the performance of the financial sector. Finally, our results highlight on the heterogeneous effect of LBs??? bankruptcy on different Chinese sectors and at different time intervals surrounding the event.