Institutional Investors, Audit Quality And Stock Price Synchronization

Stock price synchronization mainly includes two aspects: one is based on the macro level,which refers to the phenomenon that the vast majority of stocks in the entire market rise at the same time or fall at the same time in a certain period of time,which is mainly affected by the economic development,protection of property rights,Macroeconomic factors etc.the other is based on the micro level,refers to the volatility of individual stock market linkage with the extent of the market,mainly due to corporate governance mechanisms and other corporate level factors.The prototype of stock price synchronization was first proposed by Roll(1988).Roll considers that the reduction of the explanatory power of the capital asset pricing model to the stock price is due to the fact that the stock price contains more information on firm characteristics or irrational transactions.Therefore,based on Roll's research,Morck(2000)formally proposed the concept of “stock price synchronicity” and considered that the information efficiency of capital market can be measured by the level of the stock price synchronization.The more the information quality of the firm in the capital market with more efficient information,Which shows the lower price synchronization,that is the stock price synchronization negatively reflects the efficiency of capital market information;however,more and more scholars find that lower stock price synchronization does not necessarily mean higher quality of the capital market,the stock price will not only be affected by the company's trait information,the noise trading will also make the stock price volatility aggravate,there is a departure from the broader market situation,the performance of lower synchronization,and greater noise will hinder the stock price absorption of company characteristics information.Therefore,the use of the level of stock price synchronization to characterize the efficiency of capital market information,we must take into account the object of the capital markets where the environment.Although China's capital market develops rapidly,its development level is not high,and it is generally believed that there is noisy capital market in our country.However,as the capital market plays a more and more important role in the rapid development of our national economy,various kinds of promotion the system and strategy of healthy and stable development of capital market have also started to come into being.For example,the “unconventional development institutional investors” proposed in 2001,the increasing QFII approved investment quota and the examination and assessment methods for information disclosure of listed companies.Then with the implementation of these systems,whether the information environment of the capital market in our country has been improved? Will institutional investors value investment as regulators expect,improving corporate governance through active participation in corporate governance,enhancing corporate value and improving the efficiency of information in capital markets?In response to these questions,this article selects institutional investors,audit quality and stock price synchronization to study the above problems,and the combination of theoretical analysis and empirical analysis to demonstrate.In the part of theoretical analysis,we first review the relevant literature on the major variables and point out the necessity of this study.Secondly,based on the theory of effective market and behavioral finance,we analyze the current situation of our country's capital market,In the environment,how does the stock price synchronization reflect the information efficiency of the capital market? Then proceed from the information asymmetry theory,the principal-agent theory,carry on the theoretical analysis to the relationship between the institutional investor and the audit quality and put forward the research hypotheses,In a larger environment,audit quality is through which path to improve the efficiency of information in capital markets.The empirical part takes the Shanghai and Shenzhen A-share listed companies from 2010 to 2015 as the research object,constructs the model and carries on the descriptive statistical analysis,the correlation analysis and the linear regression analysis to the main variables.The results show that:(1)Under the current market environment in our country,the stock price synchronization should positively reflect the efficiency of capital market information;(2)Generally,the increase of institutional investors' shareholding ratio can improve the audit quality;(3)The quality of auditing can improve the efficiency of information in capital markets,but because of the noise in the market of our country,the quality of audit mainly improves the efficiency of capital market information by reducing noise trading.The empirical result shows that the audit quality is positively correlated with the stock price synchronization.(4)The increase of the overall ownership share of institutional investors can reduce the audit quality and the stock price synchronization.However,it is not significant.Steady institutional investors can significantly reduce the positive correlation between audit quality and stock price synchronization.But transactional institutional investors have no significant effect on this relationship.Further,in order to ensure the accuracy of the research,this paper conducts a robust test,and the result is still valid.Finally,put forward policy recommendations by the empirical results.