Capital market and corporate misbehaviour

China’s capital market has achieved unprecedented development since its inception in 1990, making a massive contribution to economic growth and keeping China on course to become the world’s large economy. This rapid development, however, has been coupled with huge swings in the stock market and frequent crashes, and the recent decline in the stock market has provoked speculation that the Chinese economic miracle may finally be coming to an end. Undoubtedly, the instability of the nation's stock market is often caused by corporate misbehaviour and a lack of market transparency, leaving investors embittered and mistrustful. Corporate misbehaviour, giving rise to corporate scandals, the abuse of arbitrage through imperfect systems, and immature and self-interest driven practice, have all contributed to recent investor distrust of the corporate sector and weak and unsound functioning of the capital market. This Special Edition of China Financial Review International (CFRI) is devoted to exploring the issues surrounding corporate misbehaviour in the capital market and examining its interactions with other stakeholders in the financial market and banking sector. Our authors also seek to investigate the implications of these influences for investors’ value creation, the sustainability of the capital market, the sound development of the banking sector, and, above all, to provide evidence to guide policymaking and practice. This Special Issue comprises a collection of six peer-reviewed papers that contribute to the debate concerning corporate misbehaviour and value creation outcomes in the unique economic and market settings of China and Asia. Topics include the investment decision and the impact of firms’ political connections; R&D investment and equity-financing constraints; the private investor’s fair preference and recognition and stock return; and speculative stock trading and its influence on fair pricing. Our final paper investigates asset quality and profitability in the banking sector, considering the information gathering activities of corporate insiders and market players, as well as the functioning of the capital market and banking sectors.