Institutional Investors Participating?Accounting Information Quality And Stock Price Synchronicity

Well-developed capital market can reasonably optimize the allocation of resources based on the listed company's share price information transfer function,and promote the.national economy rapid development.(Rajian and Zingales,1998;Beck,Levine and Loayza,2000)Roll(1988)discovered that the synchronicity between single stock return and the market return is mainly determined by the extent to which the firm-specific information impounded into price and the interference of noisy trade,which led to continuous argument between information opinion and noisy opinion.As a capital market with a dual nature of emerging and transition,Chinese stock market has gone through 20 years rapid growth,infrastructure and regulations are becoming more perfect,market efficiency has been greatly improved,but the synchronicity is still up to 48%,which indicates the efficiency of the market need to be further enhanced and there is still a lot of noisy trade.This phenomenon is closely related to the composition of capital market investors,up to now,minority investors dominates the market,so the government is trying to promote the development of institutional investors.Compared to minority investors,institutional investors have a larger size and more specialized information gathering and analysis capability,and can make rational investment decisions with motivation and ability.There are two way institutional investors to participate in stock market:Long-term holdings and Short-term speculations.These two different ways have distinct motivations?policies and impacts.Accounting information is an important source of company's information which can be obtained and used by investors decision-making,thus it becomes one of the key factors affecting the stock price volatility.High quality accounting information can increase the quantity and quality of effective information and likelihood of rational decision based on information,that make the stock price contain more firm-specific information and lower the synchronicity.Compared to noisy traders,institutional investors more likely to be the user of accounting information,who will have more influence on the weaken effect,but the different participate ways may have distinct results.Based on this,this paper investigates the relationships among the institutional investors participating?accounting information and the synchronicity using combing methods of normative research and empirical research.By using the data of Chinese listed firms from the Shanghai Stock Exchange spanning 2008-2014,we provide evidence that different institutional investor participating ways have distinct results on the synchronicity:higher holding percentage,lower the synchronicity;faster trading frequency,higher the synchronicity.From normative and empirical research perspectives,we verify accounting information quality can reduce the synchronicity.Lastly,introducing the cross-interaction terms,we discover that the institutional holding can enhance the relationship between accounting information and the synchronicity while institutional speculation can undermine this relationship.Our findings are robust with multiple measures of synchronicity.This paper is divided into six parts,and the major research content is as follows:The first part is the introduction.Based on the phenomenon of Chinese stock market higher synchronicity,this paper puts forward research motivation and significance.Then,it proposes content,ideas and methods of this paper.The second part is the literature review.Firstly,we review the conception,measurement and determined factors of stock price synchronicity.Then,we introduce the relationship between institutional investors participation and the synchronicity.Lastly,we review the literatures about the relation between stock price synchronicity and accounting information quality.The third part is the theoretical analysis and hypothesis development.In this section,we firstly analyze the distinct influences of different institutional investors participation on the synchronicity and raise first hypothesis.Then,we analyze the effect of accounting information on the synchronicity and raise the second hypothesis.Further,we consider the institutional investor participation how to change this relationship and raise the third hypothesis.The fourth part is the research design.This part introduces the sample selection,the model design and the variable definition.The fifth part is the empirical test and result.This part includes descriptive statistics,correlation analyze,multivariate regressions and robust checks.The last part is the conclusion and policy suggestion.Also,this part put forward the limitations of this paper and the research directions in future.This paper may contribute to the prior researches in three points.Firstly,we investigates the relationships among institutional investors participation,accounting information quality and the synchronicity,which abounds the empirical research on the microeconomic factors of the synchronicity.Secondly,we distinguish the different effects of two ways of institutional investor participation.Thirdly,we provide new evidence from Chinese stock market for the information opinion.