Can core competence help reduce stock price synchronicity? - Empirical evidence based on text analysis

Changling Sun, Hetao Sun, Nian Li, Muhammad Asif Khan and Zixi Zhang

PLOS ONE, 2021, vol. 16, issue 11, 1-24

Abstract: This paper constructs the measurement index of core competence by text analysis method and empirically tests the impact of core competence on stock price synchronicity. We find that the stronger the core competence, the lower the stock price synchronicity, and mechanism test shows that core competence reduces the stock price synchronicity by enhancing the transparency of corporate information, which is still valid under a series of robustness tests. Further research shows that:(1) when the corporate governance environment is poor (higher level of internal earnings management, lower quality of accounting information, greater separation of ownership and control, lower shareholding ratio of external institutional investors, weaker product market competition, less media attention), the core competence has a more significant effect on the decline of stock price synchronization; (2)vertically, the dynamic improvement of core competence in the time dimension can play a role in stabilizing stock price synchronization; (3)after distinguishing the types of core competence, we find that the core competence related to information disclosure is more helpful to reduce the stock price synchronization; (4)after the CSRC forces listed companies to disclose the core competence information in the annual report, the core competence plays a stronger role in reducing the stock price synchronization. This study reveals the important role of core competence in reducing stock price synchronization. It not only enriches the relevant literature of core competence and stock price synchronization, but also has important practical significance for the government and regulatory departments to improve the efficiency of capital market allocation.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0259409

DOI: 10.1371/journal.pone.0259409

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