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The Relationship between Accounting Information Quality and Idiosyncratic Volatility: An Empirical Study on Chinese A-Share Listed Companies

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  • Yi-Shu Wang

    (Changzhou University, China Changshu Institute of Technology Commercial College, China)

  • Ting-Chen

    (Changzhou University, China)

  • Zhen-Jia-Liu

    (Changzhou University, China)

Abstract

China's stock market has experienced a short bull market since 2008, and it is basically in a state of low volatility. The long-term market risks faced by the financial market are stable. More and more attention is paid to the idiosyncratic risk of company stocks, and the companies with bright value can still get the favor of the capital market. Most investors in the external capital market make investment decisions by using the financial accounting information of enterprises. Supported by the theories of "Stock Price Information Content Theory" and "Noise Deal Theory", the quality of corporate accounting information can significantly affect the stock trading behavior of stock traders, making the company's stock show different characteristic fluctuations. Therefore, the study of idiosyncratic risk is of great significance for obtaining high investment returns. This paper takes the Shanghai-Shenzhen A-shares from 2013 to 2018 as the research sample uses the Fama-French three-factor model to calculate the company's idiosyncratic volatility, and calculates the accounting information quality with the modified Jones model, establishes a multiple regression model, and analyzes the inflation of accounting information quality to the idiosyncratic volatility.The results show that enterprises with higher accounting information quality have lower idiosyncratic volatility, and accounting information quality is significantly negatively correlated with idiosyncratic volatility.

Suggested Citation

  • Yi-Shu Wang & Ting-Chen & Zhen-Jia-Liu, 2020. "The Relationship between Accounting Information Quality and Idiosyncratic Volatility: An Empirical Study on Chinese A-Share Listed Companies," Eurasian Journal of Business and Management, Eurasian Publications, vol. 8(2), pages 150-166.
    • Handle: RePEc:ejn:ejbmjr:v:8:y:2020:i:2:p:150-166
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