Abstract
There have been many research studies that have examined the impact of financial development on economic growth, but few of them have explored this problem from the perspective of financial market information. In this paper, we investigate whether the stock price informativeness affect the listed firms’ sustainable growth by using the Chinese manufacturing listed companies’ data from 2007 to 2017. Specifically, we use the stock price nonsynchronicity and turnover rate to measure stock price informativeness, and the economic growth sustainability is proxied by the listed companies’ total factor productivity, which is the driving force of firms’ sustainable and steady growth. We find that higher stock price informativeness is associated with higher total factor productivity, no matter whether the stock price informativeness is proxied by the stock price nonsynchronicity or turnover rate. This finding is robust when we mitigate for endogeneity issues, and when we use the return on assets (ROA) as an alternative proxy for economic growth. Our results show that the stock price informativeness can significantly improve the total factor productivity of the listed companies, and play an important role in the sustainable development of listed manufacturing enterprises.
Highlights
A large number of activities in the financial sector occur in the secondary financial markets, where various types of financial securities are traded between investors [1]
We find that higher stock price informativeness is associated with higher total factor productivity, no matter whether the stock price informativeness is proxied by the stock price nonsynchronicity or turnover rate
Our results show that the stock price informativeness can significantly improve the total factor productivity of listed companies and plays an important role in the sustainable development of the economy
Summary
A large number of activities in the financial sector occur in the secondary financial markets, where various types of financial securities are traded between investors [1]. Fama [2] believed that the stock price can reflect all of the relevant information in an efficient market, including the internal information of the managers and external investors’ private information related to the state of the company. Will these trading activities and stock price informativeness affect the listed firms’ total factor productivity (TFP), which is the core driving force for the sustainable and steady growth of the company? We examine whether more informative stock prices are associated with higher TFP
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