Investor protection, firm fundamentals information, and stock price synchronicity : a thesis submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Accounting at Massey University, Albany, New Zealand

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Massey University
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This thesis entails a cross-country study on the use of firm fundamentals information (FFI) in capital market pricing decisions and the role investor protection (IP) institutional arrangements play in enhancing the use of FFI in capital markets. I first examine the association between IP and SPS across the 40 countries of Morck Yeung and Yu (MYY) (2000) from 1995 to 2010. This is followed by a study of the association between FFI and SPS and the complementing effects of IP on this association. MYY study the use of FFI by the capital market in making investment decisions. They use stock price synchronicity (SPS) measures as indicators of the use of FFI by the market. SPS is the tendency of share prices to move in the same direction in a given period of time. They posit that when the information environment in a capital market is more developed, investors would use FFI of firms in making investment decisions and this would lower SPS. Conversely, when the information environment in a capital market is less developed, investors would rely on market information in making investment decisions and this would increase SPS. To test the use of FFI they examine the association between SPS and country development (CD), IP, and FFI variables. They do not find any conclusive evidence of the direct association between FFI and SPS, but find that CD and IP are negatively associated with SPS. They also find that CD and IP are both proxies of the general quality of the information environment, with IP being the more effective of the two. Therefore, they conclude that better IP improves the information environment and hence lowers SPS.
Investments, Decision making, Stocks, Prices, Stock prices, Disclosure of information