Audit Quality, Management Ownership And Stock Price Synchronicity

Market-level information, industry-level information and the firm-specific information has an impact on stock price fluctuation. But the firm-specific information is the fundamental factor within them. The lower the stock price synchronicity is, the more information reflected in stock price. It shows that stock price is the representative of the company’intrinsic value, which is conducive to optimizing the stock market allocation of resources. Historical studies have shown that China has the second highest synchronicity in the world. And one of the outstanding feature of state-owned companies in China is the separation of ownership and management, which lead to a serious agency conflict.This paper investigates the effect of audit quality, management ownership on the stock price synchronicity, of state-owned listed firms in China over the2009-2012period. First, we find the impact mechanism and theory basis of them. Second, we choose external auditor quality, management ownership as a measure of the incentives and constraints. Further, we estimate the regression and find that, with the improvement of audit quality, the stock price synchronicity decreases significantly. But there was no negative correlation between the proportion of management ownership and stock price synchronicity. We also show that for a higher audit quality company, management ownership can reduce the company’s stock price synchronicity effectively. The conclusions above can enrich the research of synchronicity from the perspective of internal governance, which have a positive effect on improving the operating efficiency of the security market.