Earnings Management And Stock Price Synchronicity

Stock price synchronicity(SPS)reflects the part of the stock returns that can be demonstrated by the market and industry returns.The higher the SPS is,the higher the degree to which individual stocks can be affected by the broader market.Morck,Yeung & Yu(2000)first measured the SPS in about forty countries and then discovered that SPS in China ranked second.They argue that in developed capital markets,where stock price synchrony is low,stock prices incorporate more company-level information.Therefore,some scholars take SPS as an indicator of pricing efficiency.However,in the capital market of China,earnings management behaviors of listed companies are common.Earnings management reduces the transparency of company information,affects the transmission mechanism of information to stock prices,and reduces the efficiency of capital allocation in the market.From the perspective of earnings management and the information content of company characteristics,this paper explores the impact mechanism of earnings management on SPS,and makes a more detailed exposition from the theoretical and empirical perspectives.This paper uses 4,365 companies in A-shares market except the financial companys from 2015 to 2020 as the research object,and tests the impact of accrual earnings management and real earnings management on SPS through theoretical analysis and empirical research.The main conclusions of this paper are as follows:(1)Earnings management and SPS are negatively correlated,and both accrual earnings management and real earnings management reduce the SPS.The improvement of earnings management makes the information environment worse,increases investors’ mining of private information and arbitrage transactions,integrates company-level idiosyncratic information into stock prices,and reduces the SPS.Through analysis,this paper argues that SPS is not a reflection of pricing efficiency in my country,but an indicator of private information arbitrage.(2)For companies held by prudent institutional investors,the degree of negative correlation between earnings management and SPS is reduced,and the inhibitory effect on accrued earnings management is more powerful than that of the other;companies held by transactional institutional investors will Enlarge the space for investors to arbitrage through private information,and enhance the negative correlation between earnings management and SPS.(3)The degree of negative correlation between earnings management and SPS of state-owned enterprises is low,and the inhibitory effect on account earnings management is stronger than that of real earnings management.The negative correlation between earnings management and SPS is stronger in non-state-owned enterprises.The innovation of this paper is that it enriches the research content on the consequences of earnings management,and provides a reasonable explanation for the causes of SPS in the current market.Existing literature mostly uses accrual earnings management as a surrogate variable for information quality,and few people use real earnings management for research.In the part of empirical research,this paper uses the real earnings management factor to revise the model and conduct further research,and obtains significant results and expands the research conclusion.