Noise or Information: When Stock Price Synchronicity Meets Accounting Restatements
نویسندگان
چکیده
This paper examines how and why stock price synchronicity responds to accounting restatements in China. Using a matching sample, we document that accounting restatements drive down price synchronicity. A set of regression analyses show that the declined price synchronicity reflects the increased firm-level noise/uncertainty rather than firm-level information. Further investigations with PIN and ERC/FERC confirm the noise story of price synchronicity following accounting restatements. Our results challenge the dominant view of taking price synchronicity always as an informationbased measure. It implies that caution must be exercised in future research when price synchronicity is taken to measure the level of private information in stock prices.
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