Exploring The Stock Price Synchronicity Of Chinese Listed Companies:Conceptual Model, Empirical Examination And Information Disclosure Institutional Arrangements

The basic function of the capital market is to optimize the resource allocation through the stock signal mechanism. When the capital market is effective enough, stock price optimize resource allocation by guiding the resources. The stock price’s ability to truly reflect a company’s operating conditions decides the extent to which the stock price will guide the resource allocation, and such ability is also an important index to measure the efficiency and maturity of a country’s capital market. In the mature capital market, the stock price can fully reflect the company’s idiosyncratic information. Nevertheless, in the emerging capital market, stock price is more likely to be affected by market factors, making the price unable to truly and accurately reflect a firm’s characteristics. According to the above issues, stock price synchronicity has become a popular topic in research area of the security market in recent years, attracting much attention from scholars and practitioners. In Chinese security market, the stock prices often fluctuate with the phenomenon of "rising and falling simultaneously". Given the statistical results, in any week chosen from 1991 to2005,90% of the stocks in Chinese security market rose or fell simultaneously. Based on horizontal comparison, the extent of stock price volatility in Chinese stock market reached to 80%, while that in US stock market was only 58% over the same period. The above results indicate that the phenomenon of stock price synchronicity in China is very prominent, making it worthy for scholars to pay more attention to this issue and conduct related research.Based on the above background, the present research explores the phenomenon of stock price synchronicity in Chinese security market. After reviewing the related literature and developing theoretical model, this paper selects the companies listed in Shenzhen Stock Exchange main board, SME board and GEM from 2009-2013 as research samples and mainly conduct following research:Firstly, this paper develops research model of stock price synchronicity given two perspectives. Based on the information efficiency view and noise theory, this paper builds a model for stock price volatility by considering the endogenous perspective and exogenous perspective at the same time. The empirical results indicate that:(1) The nature of ownership may extert an influence on company’s stock price synchronicity-compared with the non-state-owned enterprises, the state-owned enterprises have higher stock price synchronicity. (2) The firm size has a negative effect on stock price synchronicity. (3) The equity balance degree negatively influences the stock price synchronicity. (4) The proportion of managerial ownership is negatively related with stock price synchronicity. (5) The proportion of institutional ownership has a negative effect on stock price synchronicity. (6) Incurrent Chinese security market, the efficiency of internal control has a significantly positive effect on stock price synchronicity. (7) The external governance environment negatively moderated the relationship between information disclosure quality and stock price synchronicity. (8) The industrial competition attribute plays such a moderating role in the relationship between that when the industry’competition is low, the positive effect of information disclosure quality on stock price synchronicity will be enhanced.Secondly, this paper figures out the special effect paths of stock price synchronicity for the listed companies with defects. Based on effective market theory, principal-agent theory, information asymmetry theory and regulation theory, this paper puts forward the special effect paths of stock price synchronicity regarding the listed companies in financial distress or with illegal practices by analyzing the results of information disclosure quality evaluation. The empirical results show that:(1) Under the current situation of China’s security market, the financial distress has significantly positive impact on stock price synchronicity. (2) Degree of violation that listed company had illegal behaviors has significantly negative impact on stock price synchronicity. Meanwhile, quality of information disclosure are partial mediator variables above two points.Thirdly, this paper proposes the effect mechanism of the economic outcomes of resource allocation with the influence of stock price synchronicity. The empirical research finds that:stock price synchronicity performance reflects the unique resource allocation results of listed company since there is a lot of noise trading. Therefore, it is needed to have more accurate understand and judgment for phenomenon of the stock price synchronicity at this stage.Fourthly, in the view of stock price synchronicity, this paper provides some reasonable suggestions for the institutional arrangements of information disclosure in terms of its distinctiveness, accessibility, intelligibility and simplicity. The specific content of each aspect is as follows:(1) the institutional arrangements of distinctiveness include:institutional arrangement of distinctiveness for information disclosure under endogenous perspective,institutional arrangement of distinctiveness for information disclosure under exogenous situation, and institutional arrangement of distinctiveness for information disclosure regarding thespecial listedcompanies;(2) the institutional arrangementsof accessibility include:institutional arrangement of accessibility for information disclosurein the view of loweringcost,institutional arrangement of acceesibility for information disclosure in the view of reducing noise information,and institutional arrangement of accessibility for information disclosure to make a balance between the information timeliness and information accountability; (3) the institutional arrangement of intelligibility include:institutional arrangement of intelligibility for information disclosure according tobasic information press, institutional arrangement of intelligibility for information disclosure according tokey indicatorspress, and institutional arrangement of intelligibility for information disclosure according to language information quality;(4) institutional arrangements of simplicity include:institutional arrangement of simplicity for information disclosure from the perspective of language specification,instirutional arrangement of simplicity for information disclosurein the view of file specification, and institutional arrangement of simplicity for information disclosurefrom the perspective ofinformation completeness.Based on the views of information efficiency and noise theory, this paper formulates a model of stock price synchronicity fluctuation by considering both endogenous and exogenous research views simultaneously, which fill a theoretical gap in stock price synchronicity research area. Secondly, based on the effective market theory, the principal-agent theory, asymmetric information theory and regulation theory, this paper explores the distinguishable nature of stock price synchronicity for the listed firms with defects as well as the unique effect path, which further enriches the literature of stock price synchronicity. Finally, this paper examines the mechanism of stock price synchronicity’s economic outcome sin the view of resource allocation. In general, the present study of this paper can help make up the insufficiency of research on stock price synchronicity, and it makes important contributions in theoretical aspect. Meanwhile, this study also has the following practical value:firstly, exploring stock price synchronicity is helpful for improving the level of corporate governance and protecting small shareholders’interests; secondly, exploring stock price synchronicity is beneficial for improving the market’s transparency and optimizing the environment of investor protection; and finally, exploring stock price synchronicity will provide benefits for improving the overall quality of information disclosure of Chinese security market, facilitating the sustainable development of capital market in China.