DAVID FARBER
2018-09-27 21:44:40 UTC
Subject: [Dewayne-Net] Panda Games: Corporate Disclosure in the Eclipse of Search
Date: September 28, 2018 at 3:59:24 AM GMT+9
[Note: This item comes from friend David Rosenthal. DLH]
Panda Games: Corporate Disclosure in the Eclipse of Search
By Kemin Wang, Xiaoyun Yu, Bohui Zhang
Sep 26 2018
<http://voxchina.org/show-3-100.html>
We conduct a textual analysis and exploit an exogenous event â Googleâs 2010 surprising withdrawal from the Chinese mainland â which significantly hampered domestic investorsâ ability to access foreign information. Following Googleâs exit, Chinese firmsâ announcements concerning their foreign transactions become more bullish in comparison to similar announcements prior to the exit and to those that involve only domestic transactions. This finding suggests that firms strategically alter their disclosure behaviors when the channel to transmit information is severed.
Researchers and policymakers have long recognized the importance of a transparent information environment in capital markets. In general, corporate transparency can be achieved by encouraging market participants to produce information or by facilitating information dissemination to investors. While most of the literature focuses on the information production effort of various intermediaries including news media and financial analyses, in this paper, we study how information transmission efficiency affects corporate transparency and shapes investorsâ information sets. Specifically, we use Googleâs exit from China as a controlled experiment to identify and evaluate the efficiency of information dissemination, rather than production, in shaping corporate disclosure strategies.
In 2006, Google officially entered the Chinese mainland market with a local search engine, Google.cn, after agreeing to abide by Chinaâs censorship rules. Prior to 2006, the search engine market in China was monopolized by Baidu, a Google-like search engine that has been publicly traded on NASDAQ since 2005. After 2006, Googleâs market share steadily increased, reaching one third of Chinaâs market for internet searches in 2009. In comparison, as of January 2010, Baidu controlled 63 percent of Chinaâs market share. The search engine market in China had become a duopoly. In many ways, Google and Baidu share common ground. Both focus on the internet search business and operate their own proprietary search algorithms. Both generate revenue via paid advertising platforms, provide their own webmaster and keyword analysis tools, and use geo-targeting to generate more relevant query results for users.
However, the two differ significantly in that by providing internet searches globally, Google ranks the quality of the content without any bias in its search. Baidu, on the other hand, primarily serves the Chinese market and ranks Chinese language content higher. In fact, many analysts have attributed Baiduâs leading position in the Chinese market to a combination of factors, including a keen understanding of local tastes. While Google executives insist they had better technology, Baidu counters that it has local expertise. For these reasons, it has become a general consensus among Chinese web users to use Baidu to search for local (Chinese-based) information and to use Google for non-local information.
The two firms also differ in their focus on search quality. While Google ranks the quality content and inbound link quality higher compared to quantity when a search is executed, Baidu does not have a very strong quality content requirement, ranking high on both inbound link quantity and quality. Baidu also gravitates more towards a âcommercial search,â allowing brands to pay a high premium to display at the top of the search results. As such, highly profitable keywords rank higher than an organic search. Lastly, by focusing primarily on the Chinese mainland market and searches in the Chinese language, Baidu lags behind Google in search quality, especially for foreign information.
Googleâs 2010 Exit
On January 12, 2010, Google publicly announced the discovery of a large-scale cyberattack originating from China, which occurred in late 2009, that Google believed was aimed at gathering information on Chinese human rights activists as well as plundering its intellectual property. As a result, it was âno longer willing to continue censoringâ results on Google.cn and threatened to shut down its China operation. On March 23, 2010, Google began its partial withdrawal from the Chinese market by ceasing to censor internet search results as required by local law and moving its search engine for Chinese web users offshore. Internet users who typed in the search engineâs address were redirected to an office based in Hong Kong, where the local government doesnât censor Web browsing. On March 30, 2010, searching via all Google search sites in all languages was banned in the Chinese mainland. Any attempt to search using Google resulted in a DNS error. On June 30, 2010, Google ended the automatic redirect of Google China to Google Hong Kong. Google search has continued to be blocked in China since its departure from the Chinese mainland.
[snip]
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-------------------------------------------Date: September 28, 2018 at 3:59:24 AM GMT+9
[Note: This item comes from friend David Rosenthal. DLH]
Panda Games: Corporate Disclosure in the Eclipse of Search
By Kemin Wang, Xiaoyun Yu, Bohui Zhang
Sep 26 2018
<http://voxchina.org/show-3-100.html>
We conduct a textual analysis and exploit an exogenous event â Googleâs 2010 surprising withdrawal from the Chinese mainland â which significantly hampered domestic investorsâ ability to access foreign information. Following Googleâs exit, Chinese firmsâ announcements concerning their foreign transactions become more bullish in comparison to similar announcements prior to the exit and to those that involve only domestic transactions. This finding suggests that firms strategically alter their disclosure behaviors when the channel to transmit information is severed.
Researchers and policymakers have long recognized the importance of a transparent information environment in capital markets. In general, corporate transparency can be achieved by encouraging market participants to produce information or by facilitating information dissemination to investors. While most of the literature focuses on the information production effort of various intermediaries including news media and financial analyses, in this paper, we study how information transmission efficiency affects corporate transparency and shapes investorsâ information sets. Specifically, we use Googleâs exit from China as a controlled experiment to identify and evaluate the efficiency of information dissemination, rather than production, in shaping corporate disclosure strategies.
In 2006, Google officially entered the Chinese mainland market with a local search engine, Google.cn, after agreeing to abide by Chinaâs censorship rules. Prior to 2006, the search engine market in China was monopolized by Baidu, a Google-like search engine that has been publicly traded on NASDAQ since 2005. After 2006, Googleâs market share steadily increased, reaching one third of Chinaâs market for internet searches in 2009. In comparison, as of January 2010, Baidu controlled 63 percent of Chinaâs market share. The search engine market in China had become a duopoly. In many ways, Google and Baidu share common ground. Both focus on the internet search business and operate their own proprietary search algorithms. Both generate revenue via paid advertising platforms, provide their own webmaster and keyword analysis tools, and use geo-targeting to generate more relevant query results for users.
However, the two differ significantly in that by providing internet searches globally, Google ranks the quality of the content without any bias in its search. Baidu, on the other hand, primarily serves the Chinese market and ranks Chinese language content higher. In fact, many analysts have attributed Baiduâs leading position in the Chinese market to a combination of factors, including a keen understanding of local tastes. While Google executives insist they had better technology, Baidu counters that it has local expertise. For these reasons, it has become a general consensus among Chinese web users to use Baidu to search for local (Chinese-based) information and to use Google for non-local information.
The two firms also differ in their focus on search quality. While Google ranks the quality content and inbound link quality higher compared to quantity when a search is executed, Baidu does not have a very strong quality content requirement, ranking high on both inbound link quantity and quality. Baidu also gravitates more towards a âcommercial search,â allowing brands to pay a high premium to display at the top of the search results. As such, highly profitable keywords rank higher than an organic search. Lastly, by focusing primarily on the Chinese mainland market and searches in the Chinese language, Baidu lags behind Google in search quality, especially for foreign information.
Googleâs 2010 Exit
On January 12, 2010, Google publicly announced the discovery of a large-scale cyberattack originating from China, which occurred in late 2009, that Google believed was aimed at gathering information on Chinese human rights activists as well as plundering its intellectual property. As a result, it was âno longer willing to continue censoringâ results on Google.cn and threatened to shut down its China operation. On March 23, 2010, Google began its partial withdrawal from the Chinese market by ceasing to censor internet search results as required by local law and moving its search engine for Chinese web users offshore. Internet users who typed in the search engineâs address were redirected to an office based in Hong Kong, where the local government doesnât censor Web browsing. On March 30, 2010, searching via all Google search sites in all languages was banned in the Chinese mainland. Any attempt to search using Google resulted in a DNS error. On June 30, 2010, Google ended the automatic redirect of Google China to Google Hong Kong. Google search has continued to be blocked in China since its departure from the Chinese mainland.
[snip]
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