Comment letters and stock price synchronicity: evidence from China

Longhao Xu (), Zhijian James Huang () and Fenghua Wen ()
Additional contact information
Longhao Xu: Central South University
Zhijian James Huang: Saunders College of Business, Rochester Institute of Technology
Fenghua Wen: Central South University

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 4, No 4, 1387-1421

Abstract: Abstract This paper studies the effectiveness of comment letters by exploring the relationship between comment letters and stock price synchronicity. Using a unique dataset from China, we find that the issuance of comment letters is negatively correlated with stock price synchronicity. The results are robust to a battery of tests. Further analysis indicates that the negative relationship between comment letters and stock price synchronicity is more prominent for non-state-owned enterprises (non-SOEs) than SOEs. Then, we explore what channels comment letters affect the stock price synchronicity. Our evidence shows that firms receiving comment letters (1) have a high negative skewness indicating more negative information released, and (2) are more likely to amend their annual financial reports, leading to less stock price synchronicity. Overall, the evidence indicates that the comment letter process can help increase the firm information incorporated in the stock price.

Keywords: Comment letters; Stock price synchronicity; State-owned enterprises; Firm-specific information (search for similar items in EconPapers)
JEL-codes: G14 G38 M48 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-022-01078-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:59:y:2022:i:4:d:10.1007_s11156-022-01078-4

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-022-01078-4

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().