Market Reactions to the Hong Kong Trading Suspensions: Mandatory versus Voluntary

This paper investigates the market reactions to regulator-initiated (mandatory) suspension and issuer-initiated (voluntary) suspension on the Stock Exchange of Hong Kong. It is found that there is substantial devaluation of the stocks during either suspension, and both the variance and trading volume are higher in the post-suspension period than in the pre-suspension period. However, the changes in value and variance are sensitive to the reason for the suspension. The evidence shows that mandatory suspensions are more effective than voluntary suspensions in disseminating information, although both suspensions may not effectively ease unusual volatility immediately.