Information assimilation and stock return synchronicity: Evidence from an investor relations management platform

Yunyu Cong, Fangfang Sun, Fusheng Wang and Qiang Ye

Emerging Markets Review, 2022, vol. 53, issue C

Abstract: In this paper, we employ a unique information assimilation measure for listed firms in China based on their communications with investors through an online platform designated by the China Securities Regulatory Commission (CSRC). We examine whether a firm's efforts in enhancing investors’ information assimilation, such as providing more quality clarifications and explanations, helps facilitate the incorporation of firm-specific information in stock prices and reduces stock return synchronicity. We find robust evidence that more quality-clarifying communications contribute to lower stock return synchronicity after controlling for other information sources, and the decrease in synchronicity is mostly due to increased firm-specific information rather than noise. The causal relationship is established using a stacking DID approach and a PSM method. In a further analysis, we find that more quality communications can strengthen investors’ reaction to good news and smooth their reaction to bad news. Our study provides direct evidence that enhanced information assimilation benefits firms by entrenching more firm-specific information into stock prices.

Keywords: Stock return synchronicity; Information assimilation; IR platform (search for similar items in EconPapers)
JEL-codes: G14 M40 M41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:53:y:2022:i:c:s1566014122000541

DOI: 10.1016/j.ememar.2022.100937

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