Stock Price Synchronicity and Information Disclosure Quality: Evidence from China

Zhenghai Chi and Chun Lu ()
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Zhenghai Chi: Macau University of Science and Technology
Chun Lu: Hitotsubashi University

A chapter in Eurasian Business and Economics Perspectives, 2023, pp 255-269 from Springer

Abstract: Abstract. Based on the data from the Chinese stock market with a time span from 2013 to 2019, we examine the relationship between the stock price synchronicity and information disclosure quality, where we find that the high-quality information disclosure can weaken the stock price synchronicity and it is logically consistent with prior research. Also, this paper investigates the credibility of information disclosure audited by the international Big 4 firms and the domestic audit firms, and the result indicates that the credibility of information audited by the international Big 4 firms is relatively lower than that audited by the domestic audit firms, namely, the effect of information disclosure that decreasing stock price synchronicity is weakened by the international Big 4 firms. Simultaneously, since some crucial proposals were issued by the Chinese Institute of Certified Public Accountants (CICPA) in 2007, the phenomenon of audit switch appears frequently in the Chinese audit market (switching from the international Big 4 to the domestic audit firms). Therefore, we aim to investigate whether a distinction exists in the impact of information disclosure on reducing stock price synchronicity between international Big 4 firms and domestic Big 6 firms. The empirical results show that the domestic Big 6 firms do increase the credibility of information disclosure more than the international Big 4 firms so that it decreases the stock price synchronicity effectively, ceteris paribus. Furthermore, this paper reveals the latent new consensus that has been achieved in the Chinese audit market.

Keywords: Stock price synchronicity; Information disclosure quality; Audit firms (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:eurchp:978-3-031-30061-5_16

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DOI: 10.1007/978-3-031-30061-5_16

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