Market reaction to SEC identifications under the Holding Foreign Companies Accountable Act: Evidence from U.S.-listed Chinese firms

This study examines the stock market's reaction to the SEC's identification of U.S.-listed Chinese companies under the Holding Foreign Companies Accountable Act (HFCAA). While prior research finds negative returns around market-wide HFCAA legislative events, we investigate the effect of firm-specific identification events. Using an event-study methodology, we find that identified firms experience significant negative abnormal returns. Our findings contribute to the literature by shifting the focus from market-wide legislative shocks to direct firm-specific regulatory enforcement, demonstrating the incremental information conveyed by these identification events, and providing new evidence on the market effects of regulatory and policy designations.