Ownership concentration, Foreign shareholding, Audit quality and Stock Price Synchronicity: A Critical Review of literature and Evidence from BORSA Istanbul

Abstract

Stock price synchronicity is used to explain the co-movement of stock price in the same direction over a certain period with the market price. The aim of this seminar paper is critically review literatures which investigated the association between firm specific information such as ownership concentration, foreign shareholding, audit quality and stock price synchronicity. Most of research used to measure stock price synchronicity either classical synchronicity measure, R-square measure or zero return measure. Studies show that stock price synchronicity high in emerging markets comparing to developed markets. Poland, China, Taiwan, Malaysia, Turkey, Columbia and Mexico are among the highest synchronized countries and the reason to their higher synchronicity is poor property right controlling. Ownership concentration, foreign shareholding, audit quality are among the main factors which affected stock price synchronicity. Most of research on this topic are conducted in case of China stock markets due to china is the second higher synchronized country. The finding of reviewed literature indicated that there are negative relationships between ownership concentration, foreign shareholding, audit quality and stock price synchronicity, meaning that low ownership concentration, low foreign ownership and low audit quality resulted in high stock price synchronicity and vice versa. The paper also empirically investigated the association between stock price synchronicity and corporate governance factors such as ownership concentration, foreign shareholding and Percentage of independent directors in the board for 15 companies listed in Borsa Istanbul 30 indexe (BIST 30) covering the period between 2016 and 2019. The finding indicated that only leverage positively associated with stock price synchronicity and foreign ownership, ownership concentration and market to book ratio are negatively associated with stock price synchronicity.