Stock Price Synchronicity Research Articles

Mandatory CSR disclosure regulation and stock price synchronicity: evidence from a quasi-natural experiment

Using the mandatory CSR disclosure policy enacted in China as a quasi-natural experiment, this study provides causal evidence that mandatory CSR disclosure regulation increases stock price synchronicity. Drawing upon signaling theory and behavioral finance perspective, I argue that mandatory CSR disclosure regulation as a market level signal may affect investors’ category-learning behavior, which can further have a positive impact on stock price synchronicity. I further show that this positive impact can be attenuated when firms are followed by more analysts, when more following analysts are affiliated with large brokerage firms, and when firms have better corporate governance. This study not only provides new evidence that mandatory CSR disclosure regulation can positively affect stock price synchronicity but also suggests that analysts’ capabilities to extract and understand CSR information and better corporate governance can alleviate such an effect.

Share pledging and stock price synchronicity: Evidence from China

Share pledging and stock price synchronicity: Evidence from China

Catalyzing transparency: Proactive enforcement of information disclosure and its impact on stock price synchronicity

Catalyzing transparency: Proactive enforcement of information disclosure and its impact on stock price synchronicity

Institutional investor distraction and stock price synchronicity

AbstractThis article examines the relation between institutional investor distraction and stock price synchronicity using extreme industry returns as an exogenous shock to investor attention. We find that institutional investor distraction is negatively associated with the quantity of firm‐specific information incorporated into stock prices. Underlying mechanisms that lead to our results are the decremental disclosure of valuable information and reduced efficiency of information dissemination. Further analyses imply that the negative impact of institutional investor distraction is more pronounced for firms with weaker internal control and lower market competition. This stock price synchronicity significantly increases financial constraints and weakens investment horizons.

Inhabiting influence of digital finance on stock price synchronicity

We examine how digital finance can influence stock price synchronicity in China for the period of 2011–2021. Results suggest that the digital finance index, coverage breadth, usage depth, and digitalization level can significantly reduce stock price synchronicity. The possible channels of this linkage are information opacity and stock price crash risk. We find that digital finance is effective in reducing stock price synchronicity only in state-owned enterprises and large firms. The results are robust and immune to reverse causality and endogeneity and have important implications for investors and policymakers.

OFDI and stock price synchronicity: Evidence from China

AbstractUsing the data on outward foreign direct investment (OFDI) by listed companies in China, we find that OFDI significantly increases stock price synchronicity. This result indicates that OFDI releases more market/industry (systematic) information relative to private information. Reverse technology spillover and the host country/region institutional environment are two potential mechanisms through which OFDI increases synchronicity. We find that OFDI plays a role in screening firms with better transparency and corporate governance. The propensity score matching method and instrumental variable regressions are employed to rule out endogeneity issues. We also check the impact of stock return characteristics and macro shocks on this positive relationship.

Directors appointed by non-state shareholders and stock price synchronicity: Evidence from Chinese SOEs

Do non-state shareholders who are given more boardroom "voice" inhibit stock price synchronicity? Utilizing panel data for Chinese enterprises spanning 2007–2021, we explore the impact of directors appointed by foreign shareholders and non-foreign shareholders on stock price synchronicity. Our findings indicate that directors appointed by non-state shareholders are negatively related to stock price synchronicity. Compared with directors appointed by non-foreign shareholders, directors appointed by foreign shareholders exert more effective governance effects and reduce stock price synchronicity. Compared with directors appointed by non-foreign shareholders, directors appointed by foreign shareholders exert a more effective information effect, resulting in lower share price synchronicity. Heterogeneous analyses reveal that this impact is more pronounced in non-multinational enterprises, and enterprises with foreign directors. Furthermore, directors appointed by non-state shareholders reduce stock price synchronicity mainly through the information effect.

Government disclosure specificity and stock price synchronicity: Evidence from local government work reports in China

Using machine learning methods to conduct a textual analysis of city government work reports in China, we measure the specificity of government disclosures and examine whether this specificity affects stock pricing efficiency. We find that more specific forward-looking information disclosed by local governments is associated with lower stock price synchronicity among local listed companies. This effect is more pronounced for companies operating in environments with high economic policy uncertainty.

Social Media Networks and Stock Price Synchronicity: Evidence from a Chinese Stock Forum

The widespread communication and interaction between small investors on social media in the capital market has resulted in the formation of a social media network specific to listed companies. Using a unique dataset from an active online stock forum in China, we construct a social media network of listed companies by assigning listed companies as nodes and common commenters who post in each of the subforums for two listed companies in a year as edges. Then, we investigate the relationship between the network centrality of the listed companies and stock price synchronicity. The results show that there is a significantly negative relationship between the social network centrality of listed companies and stock price synchronicity, indicating that social media networks can improve the price efficiency of capital markets. The mechanism analysis shows that social media networks can produce more corporate‐specific information and improve the efficiency of information dissemination, thus reducing stock price synchronicity.

Data assetization and capital market information efficiency: evidence from Hidden Champion SMEs in China

Data assets serve functions such as value preservation and appreciation, financing, and value creation. They contain extensive information about enterprises’ operational status and future development prospects, providing significant references for external investors’ decision-making and greatly impacting the information efficiency in capital market. This study examines the correlation between data assetization and capital market information efficiency, along with the mechanisms and influencing factors involved. We select a sample of Chinese Hidden Champion small and medium-sized enterprises (SMEs) from 2011 to 2021, utilize text analysis methods to build a data assets dictionary, and extract keywords from corporate annual reports to depict the level of data assetization. The research results indicate that data assetization significantly enhances the information efficiency of capital market, specifically reducing stock price synchronicity and stock price delay. By categorizing data assets into own-use data assets and transactional data assets, we find that both types can improve the information efficiency of the capital market. Mechanism analysis reveals that enterprise data assetization can enhance the information efficiency of capital market by alleviating corporate financing constraints and improving forward-looking information disclosure. Factors analysis demonstrates that digital infrastructure and data circulation transactions can strengthen the enhancement effect of data assetization on the information efficiency of capital market. This study enriches the research outcomes in the micro-research field of data assets, providing valuable insights for promoting the digital transformation of Hidden Champion SMEs and the high-quality development of capital market.

Effect of ESG rating disagreement on stock price informativeness: Empirical evidence from China's capital market

We assess the level of environmental, social, and governance (ESG) rating disagreement among Chinese listed companies using ESG data from eight ESG rating providers and examine the impact of ESG rating disagreement on stock price informativeness. Our results indicate a significant and positive correlation between ESG rating disagreement and stock price synchronicity. This suggests that different ESG ratings impede the integration of company-specific details into stock prices, thereby reducing the stock price's informativeness. The opacity of corporate information and agency costs can both be used to interpret this result. We also explore the transmission channels through which ESG rating disagreement affects stock price informativeness. Our findings reveal that such disagreement lowers the quality of analysts' predictions and impedes investors' access to information, affecting the informativeness of stock prices. Furthermore, we observe that ESG rating disagreement has a greater impact on stock price synchronicity for companies with high ESG ratings and those operating in highly competitive industries. Increased media coverage would mitigate the effect of ESG rating disagreement on stock price synchronicity. Overall, our findings contribute to the literature on ESG rating disagreement and demonstrate the critical role of ESG rating disagreement in the informativeness of stock prices.

Can Outsiders Often See the Most? Evidence from China: The Impact of Foreign Investors on Insider Trading

ABSTRACT Insiders could exploit their informational advantage to obtain excessive returns. Based on the quasi-natural experiment of the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect trading systems, we examine the inhibitory impact of foreign investors on insiders’ informational advantage. Our findings indicate that the advent of the Stock Connect trading system has diminished the profitability of insider trading for the target companies. The influence operates through two primary channels: the information effect and the liquidity effect. Specifically, the Stock Connect trading system has hindered insiders’ stock buying and their profitability by reducing stock price synchronicity. Besides, it facilitates an increase in insiders’ stock selling by addressing liquidity shortages. Further tests demonstrate that those insiders with obvious informational advantage and great power are obviously impacted by the inhibition effect on their profitability. Our results show that the exploration of investment opportunities by foreign investors has reduced the insiders’ ability to profit from increasing their shareholdings. Additionally, it offers liquidity support for insiders, enabling them to decrease their shareholdings. These promote fair trading and the efficient functioning of the capital market.

Textual Dimensions of Sustainability Information, Stock Price Informativeness, and Proprietary Costs: Evidence from Integrated Reports

We examine whether integrated report quality, IRQ, is negatively associated with stock price synchronicity, an inverse measure of firm-specific information, and the extent to which the relation between IRQ and synchronicity is attenuated by proprietary costs. We measure IRQ using machine-based textual analysis along four dimensions: textual attributes, topical content, integrated reporting capitals, and financial versus sustainability information. We find that measures of IRQ based on seven textual attributes are negatively related to synchronicity, which is consistent with higher quality text containing more firm-specific content. Using PhraseLDA to identify topics in integrated reports, we find that contents related to the three most common categories—governance, performance, and risks and opportunities—are negatively associated with synchronicity. We find similar results for all integrated report capitals, except manufactured capital. Further, we find that sustainability information has a larger negative association with synchronicity than financial information. We also find that proprietary costs stemming from product market competition attenuate the association between IRQ and synchronicity, which suggests the informativeness of integrated reports varies with a firm’s competitive environment. Our results may inform the International Sustainability Standards Board as it considers the role of the Integrated Reporting Framework in developing sustainability standards.

Does the online interaction between retail investors and firms affect stock price synchronicity?

Using data from Chinese listed companies from 2010 to 2022, we examine the effect of online interactive platforms on stock price synchronicity. We find that investor–firm interactions increase stock price synchronicity. These results are robust to endogeneity checks. Our mechanism analysis suggests that information asymmetry accounts for this effect. This effect is more pronounced for firms with fewer institutional investors and those facing periods of heightened economic policy uncertainty.

The impact of climate policy uncertainty on stock price synchronicity: Evidence from China

This paper examines the broad impact of climate policy uncertainty (CPU) on stock price synchronicity (SYN) using a newly developed news-based index. Our analysis covers listed firms in China from 2000 to 2022. We find that CPU significantly and negatively affects SYN. This negative relationship is particularly pronounced in high-polluting industries and is more evident after the Paris Agreement. These results remain robust across alternative measures of SYN.

The implied risks caused by ESG rating divergence: a test based on the cost of equity capital

ABSTRACT Environment, Social, and Governance (ESG) performance serves as a crucial factor in investor decision-making; however, the existence of ESG rating divergence adds complexity and investment risk to assessing a firm’s sustainable performance. This article investigates the impact and the mechanisms behind firms’ ESG rating divergence on the cost of equity capital, enriches the research content of the economic consequences of ESG rating. This article uncovers the following key findings: (1) Increasing the divergence in a firm’s ESG ratings correlates with a rise in the cost of equity capital. (2) The influence of ESG rating divergence on the cost of equity capital, primarily through stock market performance. Specifically, ESG rating divergence positively correlates with stock price synchronicity, exhibiting a mediating effect on the cost of equity capital; it is negatively correlated with stock returns and turnover rates. (3) Digital transformation and financial institution shareholding negatively moderate ESG rating divergence and the cost of equity capital. (4) The impact of ESG rating divergence on the cost of equity capital is more pronounced in non-state-owned, non-cross-border listed, and small-size firms. The conclusions of this study provide references for relevant institutions to standardize rating systems, provide references for firms to optimize ESG information disclosure.

Stock price synchronicity and stock liquidity: International evidence

We examine the relationship between stock price synchronicity and stock liquidity using a comprehensive data set across 40 countries. Our local (within-country) empirical results reveal a positive relationship between local synchronicity and stock liquidity. The strength of this positive relationship depends on the quality of country-level institutions; the weaker the institutional environment, the stronger the synchronicity-liquidity relationship. Importantly, our global (across-country) findings mirror those at the local level. Overall, our study provides a comprehensive analysis of the synchronicity-liquidity relationship at both the local and global levels. In addition, our cross-sectional analyses provide new evidence on the institutional determinants of this relationship.

The impact of MD&A digital transformation information disclosure on stock price synchronicity in China

With the continuous development of the global digital economy, digital transformation has become an important path for enterprises. The management discussion and analysis (MD&A) section of listed companies’ annual reports has progressively incorporated detailed information on their ongoing digital transformation efforts, reflecting the growing significance of this trend in corporate reporting. This paper uses data from 2011 to 2022 of A-share listed companies in China to investigate whether and how the MD&A digital transformation information affects the stock price synchronicity. The frequency of keywords related to digital transformation within the MD&A section of the annual report is analyzed and measured to quantify digital transformation information. The results show that digital transformation information in MD&A can significantly reduce stock price synchronicity. Further mechanism tests show that analyst and media act as information intermediaries to disseminate more firm-specific information to the market. In addition, heterogeneity tests show that this effect is mainly reflected in state-owned companies and larger companies. These findings provide valuable insights for policymakers, investors, and regulators in planning regulations.

News or noise? ESG disclosure and stock price synchronicity

Environmental, social, and governance (ESG), as an important mechanism to promote the sustainable development of the capital market, is bound to have a significant impact on its stock price synchronicity. This paper examines the impact and mechanism of corporate ESG disclosure on stock price synchronicity using data from Chinese A-share listed companies from 2013 to 2022. It analyzes the dual perspectives of information efficiency and noise trading. The findings support the noise trading perspective, as ESG disclosure significantly reduces the impact of noise on stock prices and enhances firms' stock price synchronicity, and the conclusions still hold after a series of endogeneity and robustness tests. It is also found that the positive impact of ESG disclosure on stock price synchronicity is mainly realized through the paths of reducing accrual earnings management and increasing analyst attention. Moreover, the positive impact of ESG disclosure on stock price synchronicity is more significant in the group of non-state-owned enterprises, higher quality of internal control, non-polluting industries, and less market-oriented enterprises. The study in this paper not only enriches the related literature in the field of ESG disclosure and stock price synchronicity but also reaffirms the noise trading theory of the irrational school.

Air pollution, analyst information provision, and stock price synchronicity

Air pollution, analyst information provision, and stock price synchronicity