The Impact Of FDI On The Synchronization Of Stock Prices Of Listed Companies

Foreign direct investment,as an important form of international capital flow,has attracted widespread attention and influence worldwide.It has a positive impact on China’s industrial structure upgrading,export trade,and economic growth at the macro level.However,there is little literature on the micro effects of foreign direct investment in the capital market.Stock price synchronicity is an important indicator to measure the information content of listed companies’ stock prices.Since its definition and measurement were introduced in the late 1980 s,theoretical and empirical analysis has gradually become a hot topic internationally.Existing literature has shown that in the Chinese stock market,lower stock price synchronicity means that a company has sufficient stability,can resist external risks,and can avoid abnormal effects caused by market noise,thereby helping the company obtain financing and achieve stable development.Stock price synchronicity is a commonly used method internationally to measure the level of information efficiency in capital markets.An in-depth analysis of the synchronicity of stock prices of listed companies in China has important theoretical and practical value in clarifying the causes and mechanisms of synchronicity,and improving the pricing efficiency of stock prices of listed companies in China.Most of the existing theories on stock market synchronicity focus on media sentiment and accounting information quality,with few exploring the mechanism by which shareholder characteristics influence the formation of stock market synchronicity from the perspective of company operations.However,in today’s new business environment,the capital flow of listed companies will have an increasing impact on their operations and stock price stability.Therefore,it is crucial to study the impact of the capital sources of listed companies on the synchronization of their stock prices.This article intends to systematically study the relationship between foreign direct investment and the synchronization of company stock prices from a micro perspective,taking listed companies in the Shanghai and Shenzhen stock markets of China as examples.This article mainly analyzes the impact of foreign direct investment on stock price synchronicity from the perspectives of internal innovation capability and internal governance of companies.It studies a total of 4912 FDI projects of 1937 companies in China’s Shanghai and Shenzhen stock markets from 2000 to 2021.Using the DID model to test the responsiveness of foreign investment to stock price synchronicity(i.e.,the company’s awareness of information and management),as well as the impact of foreign investment actions on stock price synchronicity(i.e.,information exchange between companies and stock price fluctuations).Empirical analysis shows that after receiving foreign direct investment,companies’ stock price synchronicity significantly decreases.This indicates that companies receiving foreign direct investment can better reflect company information in stock prices,thereby reducing stock price synchronicity.However,in enterprises with imperfect governance and insufficient technological innovation,this impact is more prominent.Compared to non-state-owned enterprises and enterprises with lower innovation capabilities,the introduction of FDI by state-owned enterprises and enterprises with higher innovation capabilities has a greater impact on stock price synchronicity.The research results will help reveal the impact and mechanism of foreign investment introduction by listed companies,and lay a solid theoretical foundation for Chinese enterprises to make effective decisions when utilizing foreign investment.