Earnings quality, stock price synchronicity, and foreign ownership: evidence of ASX200 firms

Pirzada, Kashan (2023) Earnings quality, stock price synchronicity, and foreign ownership: evidence of ASX200 firms. International Journal of Disclosure and Governance. ISSN 1741-3591

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Abstract

This study examines the impact of firms’ earnings quality on stock price synchronicity, considering the foreign equity ownership to moderate such a relationship. This study argues that firms’ earnings quality is firm-specific information that can enhance the stock price synchronicity in the market. The sample used is ASX200 firms in 2017–2019 period, excluding firms in Finance and Utility sectors. The data are collected from the databases FactSet and Morningstar. Using pooled regression analysis, this study shows that out of three market-based earnings quality attributes, timeliness significantly reduces information asymmetry, enhances transparency by impounding more firm-specific information in prices, and ultimately mitigates pricing errors in trading, hence lower stock price synchronicity. It supports prior studies showing that market impound the loss quicky. Meanwhile, conservatism and relevance show insignificant results, emphasizing the superiority of timeliness over other market-based earnings quality in the developed capital market. We discover that foreign equity ownership is not regarded as firm-specific information that reduce the stock price synchronicity. As a moderating variable, the foreign ownership level decreases the impact of timeliness on stock price synchronicity.

Item Type: Article
Identification Number: https://doi.org/10.1057/s41310-023-00210-7
Dates:
DateEvent
24 October 2023Accepted
16 November 2023Published Online
Uncontrolled Keywords: ASX, Earnings quality, Foreign ownership, Stock price synchronicity, Timeliness
Subjects: CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
CAH17 - business and management > CAH17-01 - business and management > CAH17-01-08 - accounting
Divisions: Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics
Faculty of Business, Law and Social Sciences > College of Business, Digital Transformation & Entrepreneurship
Depositing User: Kashan Pirzada
Date Deposited: 17 Nov 2023 16:06
Last Modified: 20 Jun 2024 12:05
URI: https://www.open-access.bcu.ac.uk/id/eprint/14956

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