Institutional Development and Stock Price Synchronicity: Evidence from China

39 Pages Posted: 23 Aug 2013 Last revised: 9 Mar 2017

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Liang Song

affiliation not provided to SSRN; University of Massachusetts Dartmouth

Paul Wachtel

New York University - Stern School of Business

Date Written: August 12, 2013

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

JEL Classification: G14, G15, G24, G38

Suggested Citation

Hasan, Iftekhar and Song, Liang and Song, Liang and Wachtel, Paul, Institutional Development and Stock Price Synchronicity: Evidence from China (August 12, 2013). Journal of Comparative Economics, Vol. 42, No. 1, 2014, Pages 92–108 , BOFIT Discussion Paper No. 20/2013, Available at SSRN: https://ssrn.com/abstract=2314906 or http://dx.doi.org/10.2139/ssrn.2314906

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Liang Song

affiliation not provided to SSRN

University of Massachusetts Dartmouth ( email )

285 Old Westport Road
N Dartmouth, MA 02747
United States

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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