A Study On The Informativeness Of Stock Price In Chinese Stock Market

Stock price informativeness is an important indicator in measuring a country's securities market operating efficiency, it means that firm-specific information is not fully capitalized into stock prices. The more the firm-specific information absorbed by stock prices, the more the market value of the firm approaching to its true values. The low stock price informativeness means that stock prices move in the same direction together, which implies that firm-specific information is not fully capitalized into stock prices. This phenomenon not only eliminates the difference in companies of sorts and weakens the economic role of prices that serve as signals for investment decisions, but also decreases the resource allocation efficiency of the stock market(see e.g.,Wurgler,2000;Morck et al.,2000,2003,2004; Jin and Myers,2006).In Chinese security market,stock prices are highly correlated.In the findings of Morck, Yeung, and Yu(2000), the synchronicity of return variation in China is in the second place in the world which is only less than Poland's. Why the synchronicity of stock price co-movement for the Chinese market is so high? And what is the reason in nature?Based on the studies and the special system background, this paper chooses public-held companies in China as research objects, and systematically analyzes the cause of information of the synchronicity from the corporate governance and the Institutional Environment, corporate governance and product competition, and the information circumstance of companies. As a result, this paper gets some important findings just as follows:Firstly, the ownership structure has great effect on the improvement of the informativeness of stock prices,in line with existing researches. A better institutional environment tends to increase the informativeness of stock,and the law index is more significant than the other two indexes. We also find the market index's positive effect on the informativeness of stocks is more significant and larger in sub-samples of government controlled companies than in non-government controlled companies. The law index has a significant effect on the informativeness of non-government controlled companies.Secondly, effective product market competition has a positive effect of the relationship between an enterprise's equity concentration and stock price synchronicity. There is U-type relationship, when the first largest shareholder holding less than 20% or greater than the proportion of 50%, the company's share price has more firm-specif information, and the controlling shareholder of the type can significantly explain this relationship; and our further analysis shows that the effct of market competition in a different ownership structure is the same.Thirdly, we choose the rankings of disclosure quality made by Shenzhen Stock Exchange as a proxy for corporate transparency, analyzes the impacets on the informativeness of stock price, and tests the endogeneity of disclosure level value. We find that the transparency of company information does not have remarkable positive influence on the informativeness of the stock prices.