Journal of Accounting Institute
Stock Price Synchronicity and Information AsymmetryMohammad Reza Toutounchi Asl, Sohrab Abdı
This study aims to investigate how stock price synchronization affects information asymmetry. In this regard, the stock price synchronicity was estimated using the Market Model. Furthermore, the proposed buy and sell gap was used to evaluate information asymmetry. Therefore, to achieve the purpose of the research we have screened 95 firms from among accepted firms in the Tehran Stock Exchange from 2010 to 2020, including analysis. Accordingly, a multiple regression model is used to test our hypotheses. According to the results, there is a direct and significant relationship between Stock Price Synchronicity and Information Asymmetry. In other words, as a result of the publication of special information and the reflection of this information on the prices of stocks, it reduces the price synchronicity of stock and at the same time creates a smooth flow of information to investors, thus reducing information asymmetry.
Hisse Senetlerinin Fiyat Eşzamanlılığı ve Bilgi AsimetrisiMohammad Reza Toutounchi Asl, Sohrab Abdı
Bu araştırmanın amacı, hisse senetlerinin fiyat eşzamanlılığının bilgi asimetrisi üzerindeki etkisini incelemektir. Bir şirketin piyasa veya sektör ile hisse senetlerinin fiyat eşzamanlılığını ölçmek için Pazar Modelinden yararlanılırken bilgi asimetrisini ölçmek için hisse senetlerine teklif edilen satın alma ve hisse senetlerinin satış fiyatlarının farkından yararlanılmaktadır. Dolayısıyla araştırmanın amacına ulaşmak için Tahran Menkul Kıymetler Borsasında işlem gören şirketler arasından 95 aktif şirkete ait 2010-2020 dönemini kapsayan veri analizine konu edilmiştir. Ayrıca, belirlenmiş olan hipotezlerin test edilebilmesi için çok değişkenli regresyon modeli kullanılmaktadır. Araştırma bulgularına göre, hisse senetleri fiyat eşzamanlılığı ile bilgi asimetrisinin ilişkisi doğru orantılı ve istatistiksel olarak anlamlı bulunmaktadır. Diğer bir ifade ile özel bilgilerin yayınlanması ve bu bilgilerin hisse senetlerinin fiyatlarına yansıması sonucunda hisse senetlerinin fiyat eşzamanlılığını azaltıp yatırımcılara düzgün bir bilgi akışı sağlayarak bilgi asimetrisinin de azalmasına neden olmaktadır.
Introduction and Literature Review
Managers have access to more information as a result of their position, while the owners are deprived of access to certain information. This also applies to various investor groups. Information asymmetry describes this asymmetrical flow of information between owners and their representatives. The confidential information is, the scope of the proposed price difference between investors buying and selling stocks rise, resulting in a return on investors who do not have access to such information, is reduced (Jin and Myers, 2006). Information asymmetry may have undesirable consequences, such as increased transaction costs, reduced market efficiency, reduced liquidity, and generally reduced capital gains in trading, leading to high fluctuations in stock prices (Ghaemi and Taghizadeh, 2016). Improving the quality of corporate information disclosure reduces information asymmetry (Noravesh and Hosseini, 2009). The range of bid prices among investors would widen due to the substantial amount of confidential information. As a result, investors without access to such information will see lower returns) Lafond and Watts, 2008). In this regard, proper disclosure of company-specific and confidential information will result in a uniform distribution of information and reduce information asymmetry, which will also result in a balanced distribution of returns among investors. As a result, in the beginning, it causes people to trust the capital market and then it attracts scarce resources to the capital market. As previously indicated, companies will lessen information asymmetry as a result of adequate disclosure of certain information. In this regard, the stock price synchronicity as a criterion for measuring the extent of disclosure of companyspecific and confidential information to outsiders and the reflection of this information on stock prices has been raised and has been studied and investigated in numerous research (Haggard et al., 2008; Didar et al., 2018). Stock price synchronicity represents the extent to which a firm’s stock returns are explained by the market or industry returns, and it can measure the relative amount of company-specific information (In contrast, market or industry-level information) reflected in stock prices. In this context, stock prices with more synchronicity (lower), the higher relative amount of information on the market or industry (company-specific information) on their own. In other words, stock prices with lesser stock price synchronicity include a larger percentage of information relevant to the company (Piotroski and Roulstone, 2004). The literature shows that firms with high investment and lower stock price synchronicity performance are related. Because the lower stock price synchronicity is an indicator of the greater reflection of firm-specific information on stock prices (Piotroski and Roulstone, 2004; Haggard et al., 2008; Didar et al., 2018). However, if the lower stock price synchronicity is an indication that users are receiving more corporate-specific information, this should result in less information asymmetry. The extent to which individuals have access to specific and secret information is one of the most significant causes of information asymmetry because of the aforementioned principles. Therefore, the present study investigates the relationship between stock price synchronicity and information asymmetry to obtain empirical evidence regarding the relationship between these variables.
Regarding the purpose of the research and the theoretical foundations stated, the present hypothesis is formulated as follows: Research hypothesis: Stock price synchronicity has a significant impact on information asymmetry.
Required data were extracted from the Rahavard Novin database and financial statements. Statistical tests were performed using Eviews 12 and Stata 16 software. In addition, 95 companies among those listed on the Tehran Stock Exchange from 2010 to 2020 were surveyed in the screened community to meet the research objectives.
The results of the research hypothesis test showed that stock price synchronicity has a positive and significant effect on information asymmetry. Therefore, the hypothesis of the present study is not rejected.
Discussion and Conclusion
In the present study, due to the idea of information price synchrony and the relationship between two variables expressed as empirical evidence, the influence of stock price synchronicity on information asymmetry was demonstrated. The findings show that stock price synchronicity has a growing impact on information asymmetry. A company’s specific and confidential information is not disclosed to investors if a company’s stock price moves simultaneously with a market or industry price. Because in this case, investors rely more on the market or industry-level information because of the high cost of collecting company-specific information, resulting in high synchronicity of the company’s stock price with the market or industry. When specific information and the confidential company are not symmetrically placed at the disposal of investors, corruption of information and information asymmetry. Research findings show that stock price synchronicity is directly related to information asymmetry. That is, with the increase in stock price synchronicity, information asymmetry increases, and with a decrease in stock price synchronicity, which indicates an increase in company-specific market information, information asymmetry decreases. Therefore, it can be deduced from the information concept’s stock price’s synchronicity.