BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 20/2013:
Institutional development and stock price synchronicity: Evidence from China
Iftekhar Hasan ()
, Liang Song ()
and Paul Wachtel ()
Abstract: Better developed legal and political institutions result
in greater availability of reliable firm-specific information. When stock
prices reflect more firm-specific information there will be less stock
price synchronicity. This paper traces the experience of China, an economy
undergoing dramatic institutional change in the last 20 years with rich
variation in experiences across provinces. We show that stock price
synchronicity is lower when there is institutional development in terms of
property rights protection and rule of law. Furthermore, we investigate the
influence of political pluralism on synchronicity. A more pluralistic
regime reduces uncertainty and opaqueness regarding government
interventions and therefore increases the value of firm-specific
information that reduces synchronicity.
Keywords: institutions; China; stock price synchronicity; (follow links to similar papers)
JEL-Codes: G14; G15; G24; G38; (follow links to similar papers)
39 pages, August 12, 2013
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- This paper is published as:
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Hasan, Iftekhar, Liang Song and Paul Wachtel, (2014), 'Institutional development and stock price synchronicity: Evidence from China', Journal of Comparative Economics, Vol. 42, February, No. 1, pages 92-108
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