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Ownership, Analyst Coverage, and Stock Synchronicity in China

Listed author(s):
  • Feng, Xunan

    (Southwestern University of Finance and Economics)

  • Hu, Na

    (Shanghai International Studies University)

  • Johansson, Anders C.

    ()

    (Stockholm China Economic Research Institute)

This study examines how ownership structure affects the information environment of publicly traded firms in China. We hypothesize that concentrated ownership and the associated separation of ultimate control and ownership rights create agency conflicts between controlling shareholders and minority investors leading controlling owners to withhold firm-specific information from the market. We test this hypothesis by analyzing the effect of ultimate ownership structure and analyst coverage on stock return synchronicity. We find that a greater separation of control and ownership rights increases the response coefficient of stock return synchronicity to analyst coverage. This result is robust to endogeneity, a series of robustness checks, and an alternative hypothesis based on noise trading. The incentive of controlling owners to limit firm transparency thus leads analysts to disseminate more market-wide information.

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File URL: http://swopec.hhs.se/hascer/papers/hascer2015-036.pdf
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Paper provided by Stockholm China Economic Research Institute, Stockholm School of Economics in its series Stockholm School of Economics Asia Working Paper Series with number 2015-36.

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Length: 76 pages
Date of creation: 30 Jun 2015
Handle: RePEc:hhs:hascer:2015-036
Contact details of provider: Postal:
Stockholm China Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Phone: +46-8-736 90 00
Fax: +46-8-31 81 86
Web page: http://www.hhs.se/en/Research/Institutes/SCERI/

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