Voluntary Disclosure, Enterprise Risk Management, Culture and Stock Price Synchronicity


Recent literature reports that stock prices reflect non-only the systematic information but also the un-systematic information. The study, in this regard, is an attempt to explore the factors which are crucial for stock price informativeness or stock price synchronicity. The study signi cantly contributes in a way that it adds many new dimensions which are crucial for rms’ and countries’ information environment and that have not been tested in association with stock price synchronicity. The study applies the panel data regression on 450 companies from 15 markets as 30 companies from every market for the period of June 2009 to July 2017. The markets are grouped into three categories based on developed, emerging and developing markets.

The study nds that the rm’s information environment and country’s both formal and informal information environment signi cantly affect the stock price synchronicity. The low stock price synchronicity is found in developed economies in comparison to emerging and developing economies. Consistent with the same notion, voluntary disclosures are higher in developed markets in comparison to emerging markets. Overall the rm’s internal control, nancial constraints and enterprise risk management are found negatively related with stock price synchronicity. The study also nds the partial acceptance of rm age and government ownership with a positive relation with stock price synchronicity. The country’s economic globalization is found signi cant and negatively related with stock price synchronicity. The same is the case with control of corruption, rule of law and regulatory quality of a country. Out of three cultural dimensions, only individualistic vs collectivistic dimension is found signi cant and consistent with the hypothesis. Lastly, the study repeats all the analysis with systematic volatility and idiosyncratic volatility in addition to stock price synchronicity and nds the signi cant results with them also.

Download full paper