Audit quality, ownership structure, and stock price synchronicity

Abstract

This paper uses A-shares non-financial listed companies in Shanghai and Shenzhen Stock Exchange over the seven years period from 2012 to 2018 as sample, to investigate how audit quality and ownership structure correlate with stock price synchronicity. The results show that stock price synchronicity is lower when the company hires international Big Four as their auditor which provide good audit quality, while the synchronicity is higher when the company’s biggest shareholder is government-related. By hiring the international Big Four, the company shows they are willing and confident to disclose credible information to the market, thus lower the stock price synchronicity; Being related to the government, the biggest shareholder may tend to hide the unfavorable information, and hinder the flow of firm-specific information to the market, thus higher the synchronicity.