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This study aims to examine the effects of firms’ accounting disclosure policies on stock price synchronicity and stock crash risk, using a sample including 13 emerging markets. Furthermore, this research investigates how these relationships are affected by country-level investor protection and firm-level governance rankings.

This paper uses accounting disclosure measures constructed based on survey questions by Credit Lyonnais Securities Asia (2001, CLSA). The accounting disclosure measure is used to explain the two dependent variables, stock price synchronicity and stock crash risk. The stock price synchronicity measure is defined as the logistic transformation of R2 following Hutton et al. (2009) and Jin and Myers (2006). R2 is taken from the estimation of an extended market model. The stock crash risk variable is measured as the frequency difference between extremely negative and positive stock return residues following Jin and Myers (2006). These stock return residues are taken from the estimation of an extended market model. Because the CLSA firm-level disclosure data are from 2000, this paper matches other data taken from the same year, for consistency. The final sample includes 204 observations in 13 emerging countries.

This paper finds that firms’ stocks are less synchronized with the entire market and have less crash risk if firms have superior accounting disclosure policies. These results suggest that the cost to collect firm-specific information may be decreased for investors if firms are more transparent. Thus, these firms’ stocks have more firm-specific information content. These results also suggest that management is less likely to hide some negative information and release such negative information suddenly in the future if firms have higher levels of accounting disclosure. Thus, these firms’ stocks are less likely to crash. In addition, the influences of firms’ accounting disclosure policies on stock price synchronicity and crash risk are more significant for firms with superior country-level investor protection and firm-level governance rankings. These results imply that external investors place more value on accounting disclosure by well-governed firms because firms with superior governance standards are less likely to intentionally disclose misleading information. Thus, these firms’ stocks can incorporate more firm-specific information and have less crash risk.

The current study is the first to show that the effects of accounting disclosure on stock price synchronicity and crash risk are more pronounced for firms with superior country-level investor protection and firm-level governance standards. Thus, this research extends the literature by providing a comprehensive picture of the influences of accounting disclosure on stock markets. In addition, the existing literature (Chen et al., 2006; Durnev et al., 2004) shows that firms with lower stock price synchronicity are associated with higher investment efficiency because managers invest based on the information in stock prices. Obviously, higher stock crash risk is highly related to higher bankruptcy risk for firms. Thus, examining the effects of accounting disclosure on stock price synchronicity and stock crash risk is of obvious importance to policy makers.

This chapter examines the relationship between directors and officers (D&O) liability insurance and stock-price synchronicity by testing competing corporate governance-related monitoring and moral hazard-related agency conflict hypotheses. Testing a sample of stocks listed on the Taiwan Stock Exchange and the Taipei Exchange for 2008–2020, the empirical results of this study indicate that D&O insurance in Taiwan is negatively correlated to stock-price synchronicity. This negative relation is robust to a battery of tests, including those of fixed-effects regression models, alternative sample periods, alternative synchronicity measures, and alternative insurance measures. Further evidence indicates that this negative relationship is more pronounced among firms with greater agency problems, especially during periods of high market uncertainty. Overall, these findings support the corporate governance-related monitoring hypothesis, which posits that firms with greater D&O insurance are likelier to be characterized by better governance structures and information transparency. Additionally, their stock prices are more likely to reflect firm-specific information in a timely and precise manner, and they are more likely to have lower synchronicity with the industry and market.

The purpose of this paper is to examine the association between politically connected (POLCON) firms and stock price synchronicity, and whether this association can be attenuated by institutional investors.

This paper uses an ordinary least square regression model to examine the association between POLCON firms and stock price synchronicity; institutional ownership and stock price synchronicity; the moderating role of institutional ownership on the association between POLCON firms and stock price synchronicity; institutional domiciles and stock price synchronicity; and the moderating role of institutional domiciles on the association between POLCON firms and stock price synchronicity.

The result shows that POLCON firms are positively associated with stock price synchronicity. Further, the author also finds that institutional monitoring, through higher ownership by local institutional investors is associated with lower stock price synchronicity. In addition, this study documents evidence that institutional investors, particularly local institutional investors can improve stock price informativeness in POLCON firms.

The results suggest that POLCON firms are plagued by severe agency problems, resulting in limited flow of firm-specific information to the capital markets. However, the author shows that POLCON firm’s agency problems can be attenuated through effective monitoring by institutional investors. Further, institutional domiciles are shown to be significantly associated with stock price synchronocity. However, effective monitoring is largely driven by local institutional investors, in line with the geographical proximity theory.

The results suggest that regulators should increase their surveillance and monitoring effort, particularly on firms with close ties to the government. In particular, POLCON firms should be required to be more transparent in their corporate dealings. Additionally, auditors should intensify their audit efforts on POLCON firm to provide more reliable financial information to minority shareholders, investors and analysts. Finally, institutional investors should be incentivized by the Malaysian Securities Commission, via, the code of governance to play an effective monitoring role in Malaysian firms.

This study reveals that POLCON firms’ severe agency problems can be alleviated by effective institutional monitoring. Further result identifies institutional domiciles as a significant factor in influencing monitoring effectiveness in POLCON firms. This paper provides insights into the dynamic interaction between political connections, institutional monitoring, firm governance and capital markets behavior of an emerging market.

This paper aims to document the effect of shariah compliance on stock price synchronicity.

This paper uses the data of non-financial firms from India and various estimation procedures (pooled OLS and instrument variable regression) to test the arguments presented in this paper. The time period of the study ranges between 2000 and 2019.

The results show that shariah-compliant firms have significantly higher levels of synchronicity than non-compliant firms. The findings hold after comprehensive inclusion of relevant controls and to a number of sensitivity tests. The authors attribute this result to the unique financial characteristics (lower levels of leverage, liquidity and cash) of shariah-compliant firms. The paper argues that these characteristics are related to better information environment which is responsible for higher levels of synchronicity. The paper also shows that the difference in the synchronicity levels of the two groups is less pronounced for those shariah-compliant firms that have relatively high levels of leverage and cash ratios.

The authors believe that this is an initial attempt to document the impact of shariah compliance on stock price synchronicity.

The purpose of this paper is to investigate how block trading and asymmetric information contribute to the firm-specific information measured by the stock return synchronicity. Based on China stock market which is dominated by individual investors, this study focus on whether traders of block trading, which are usually institutional investors, are “information trader.”

Based on the high frequency data, the paper constructs two measures of information asymmetry, intraday measure and inter-day measure. Then the paper constructs a multiple regression model and examine how block trading and information asymmetry contribute to the firm-specific information measured by the stock return synchronicity.

The results show that: on the one hand, block trading transmits more firm-specific information, and can reduce the synchronicity; on the other hand, when the degree of information asymmetry is higher, block trading contains more firm-specific information and has a stronger effect on synchronicity. The effect of information asymmetry specifically displays as: block trading during the first half-hour of the trading day has a stronger effect on synchronicity; and block trading occurred in the days with publicly announced trading information has greater impact on synchronicity.

The conclusions have important practical implications: for market regulators, monitoring for block trading can improve the recognition and prevention of insider trading; for individual investors, especially the risk aversion investors, recognition of intraday and inter-day information asymmetry is beneficial for them to avoid the risk of asymmetric information.

First, the domestic and foreign research mostly concentrated impact of block trading on stock prices. However, reasons of stock price changes include the information effect and non-information effect, this paper selects stock return synchronicity as firm-specific information measure, and mainly focus on the information effect of block trading. Second, based on the high frequency data, the paper constructs two measures of information asymmetry, intraday measure and inter-day measure. Compared with general measure of information asymmetry, such as firm size, earnings quality, the two measures based on high frequency data are more precisely.

The purpose of this paper is to document the impact of stock price synchronicity (SYNCH) on the dividend payout ratio.

The authors use data from India for the period between 2000 and 2012 and the panel regression approach to test their arguments.

This paper documents that the relationship between synchronicity and dividend payout ratio is positive until a turning point is reached. After that point, synchronicity has a negative impact on dividend payout ratio. The authors argue that firms with low synchronicity have higher information asymmetries. As a result, they have an incentive to develop a reputation as better-governed firms by paying high dividends. However, as synchronicity increases further, information asymmetries go down and as a result incentive to use dividend payouts as a mechanism to reduce information asymmetries goes down. Therefore, positive relationship between synchronicity and dividend payout ratios breaks down at high levels of synchronicity.

The authors provide evidence regarding the role played by SYNCH – a publicly available measure – on dividend polices adopted by firms within the context of emerging markets.

This study investigates the level of stock return synchronicity in African markets with the aim of establishing whether, contrary to conventional wisdom, stock return synchronicity can be low in countries with relatively weak information environments.

The authors use a sample of five African countries (Botswana, Ghana, Kenya, Nigeria and South Africa) and a total of 616 firms over the period 2005–2015. This study's main measure of synchronicity is the R² from a regression of stock returns on index returns. The authors also carry out regression analysis to investigate the main firm-level drivers of synchronicity.

On average, firms in African markets do not exhibit high levels of stock return synchronicity, providing support for the view that stock return synchronicity can be low in markets with relatively weak transparency. The authors, however, observe an increase in the level of synchronicity during the global financial crisis, notably for Ghana and Kenya. In the regression analysis, the main firm-level driver of synchronicity is firm size, while contrary to some previous studies, ownership structure has no impact. The authors also find evidence of the impact of changes in accounting regulation, notably the mandatory adoption of IFRS, on the level stock synchronicity.

This study contributes to the understanding of stock return synchronicity and how price discovery can vary between different information environments. The authors argue that stock returns in African countries may not always fit the stereotypical view that they are synchronous. The level of synchronicity among firms suggests that corporate events may carry some stock price implications.

The purpose of this paper is to empirically analyze the effects of stock price synchronicity and herding behavior of qualified foreign institutional investors (QFII) on stock price crash risk, especially the mediating effect of herding behavior of QFII on the relation of stock price synchronicity and stock price crash risk.

Taking China’s A-share listed companies from 2005 to 2014 and QFII holding shares data as the research sample, this study calculates herding effect index, sock price synchronicity index and stock price crash risk index, and perform linear regression.

This study concludes that, either herding behavior of QFII or the stock price synchronicity can increase the stock price crash risk. Further study reveals that, the herding behavior of QFII also improves the effect of stock price synchronicity on stock price crash risk. Namely, herding behavior of QFII acts as the mediating role between stock price synchronicity and stock price crash risk.

This study empirically analyzes and verifies the mediating roles of herding behavior of QFII in affecting the relation of sock price synchronicity and stock price crash risk for the first time. The findings of this study contribute to the study of the role of QFII in stabilizing Chinese security market.

This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country.

The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information.

Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity.

Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies.

This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.

The findings suggest that reducing information processing costs as a result of better transportation is an important ingredient in promoting the pricing of firm-specific information. This study aims to discuss the aforementioned issue.

The authors adopt a difference-in-difference (DID) research design to examine the impact of information processing costs on stock price synchronicity with a sample of firms listed in the Chinese A-share market during 2007 and 2017.

This paper shows that the launch of the high-speed railway (hereafter HSR) in China is associated with lower stock price synchronicity, consistent with the theory that the HSR reduces investors’ information processing costs (cost of monitoring, acquiring and analyzing firm disclosures). This effect is more pronounced for companies located in remote areas than for those located in large cities. Further tests show that the negative association between the launch of HSR and stock price synchronicity is stronger for companies with higher information asymmetries, proxied by higher equity concentration, higher complexity and lower internal control quality.

This study contributes to the literature in the following three ways. First, prior literature relates the effects of geographic distance to information transmission and information asymmetry between insiders and outside investors (e.g. Coval and Moskowitz, 2001; Kang and Kim, 2008; Malloy, 2005). The authors supplement the literature by providing new empirical evidence from an exogenous shock (natural experiment), that is, the launch of HSR, that facilitates transportation and reduces information transmission costs. Second, prior studies have shown that new airline routes that facilitate transportation improve investment and productivity (e.g. Bernstein et al., 2016; Giroud, 2013). The authors extend this stream of studies by showing that the development of HSR networks reduces information processing costs, and promotes the incorporation of firm-specific information in the asset pricing. More importantly, in this study, the authors explicitly incorporate disclosure processing costs theory into our framework thus enhancing our understanding of how and why improvements in transport relate to better market outcomes.