[Home ] [Archive]   [ فارسی ]  
:: Main :: About :: Current Issue :: Archive :: Search :: Submit :: Contact ::
Main Menu
Home::
Journal Information::
About the Journal
Editorial Board
Aims& Scopes
Journal News
Articles archive::
All Issues
Current Issue
For Authors::
Call for Papers
Submission Instruction
Submission Form
For Reviewers::
Reviewers Section
Registration::
Registration Information
Registration Form
Contact us::
Contact Information
Contact us
Site Facilities::
Site map
Search contents
FAQ
Top 10 contents
Inform to friends
::
Search in website

Advanced Search
..
Receive site information
Enter your Email in the following box to receive the site news and information.
..
:: year 15, Issue 60 (2023) ::
fa 2023, 15(60): 37-58 Back to browse issues page
The Effect of Stock Price Synchronicity on Mispricing with an Emphasis on the Role of Financial Reporting Quality
Seyed Hesam Vaghfi * 1, Jeyran Seddighi2 , Seyed Ehsan Hosseini2 , Saeed Pakdelan3
1- Department of Management,Economics & Accounting,Payame Noor University,Tehran,Iran.
2- Faculty of Administrative Sciences, Imam Reza International University, Mashhad, Iran.
3- Department of Accounting Shamdiz Non-Profit Higher Education Institute, Mashhad, Iran.
Abstract:   (198 Views)
Abstract
 Stock mispricing is a situation where the stock price in the market capital differs from its intrinsic value. Incorrect stock pricing lead to a decreased efficiency in resource allocation in the stock market. Given the importance of stock pricing in the capital market, this study aims to investigate the effect of stock price synchronization on stock mispricing, with a focus on the role of financial reporting quality.The population of the research consisted of all the companies admitted to the Tehran Stock Exchange. Using the specified limitations, 149 companies were selected as the sample for the period of 2011-2021, and the research hypotheses were tested using the multivariate regression method.The findings from the test of research hypotheses indicate that the Synchronicity of stock prices has a significant and direct relationship with stock mispricing. Conversely, the evidence suggests that the quality of financial reporting has a moderating (weakening) effect on stock prices and stock mispricing.The results of this research emphasize the concern about the decrease in the quality of financial reporting and provide insight so that the drafters of regulations and researchers can identify the root causes of the decrease in the quality of financial reporting and, if necessary, revise the current regulations governing financial reporting. This is because the quality of financial reporting can counteract the adverse effect of stock price concurrency on stock mispricing.
Article number: 3
Keywords: stock price synchronicity, stock mispricing, financial reporting quality.
Full-Text [PDF 854 kb]   (55 Downloads)    
Type of Study: Research | Subject: Special
References
1. Ahmad, A. (2013). Investor protection, firm fundamentals information, and stock price synchronicity. Ph.D. Dissertation, at Massey University, Albany.
2. Alzahrani, M., & R.P. Rao. (2014). Managerial Behavior and the Link betweenStock Mispricing and Corporate Investments: Evidence from Market-to-Book Ratio Decomposition. The Financial Review 49: 89-116.
3. Assad, N.F., & M.T. Alshurideh. (2020). Financial reporting quality, audit quality, and investment efficiency: evidence from GCC economies. WAFFEN-UND Kostumkd Journal 11(3): 194-208.
4. Baker, M., J. Stein & J. Wurgler. (2003). When does the market matter? Stock prices and the investment of equity-dependent firms. Quarterly Journal of Economics 118(3): 969–1005.
5. Baoa, T., M. Hennequinb, C. Hommesb & D. Massaro. (2019). Coordination on bubbles inlarge-group asset pricing experiments. Journal of Economic Dynamics and Control 13(3): 115-137.
6. Barber, B., T. Odean & L. Zheng. (2005). Out of sight, out of mind: The effects of expenses on mutual fund flows. Journal of Business 6: 2095–2119.
7. Bhattacharya, U., H. Daouk & M. Welker. (2003). The world price of earnings opacity. The Accounting Review 78: 641–678.
8. Bushman, R., & A.J. Smith. (2001). Financial accounting information and corporate governance. Journal of Accounting Economics 32: 237-333.
9. Campbell, J., & T. Vuolteenaho. (2004). Bad beta, good beta. American Economic Review 94: 1249-1275.
10. Chen, A., & J.J. Gong. (2019). Accounting comparability, financial reporting quality, and the pricing of accruals. Advances in Accounting 45: 0882-6110. https://doi.org/10.1016/j.adiac.2019.03.003.
11. Chen, L., R. NovyMarx & L. Zhang. (2010). An Alternative Three-Factor Model. Working Paper, SSRN.
12. Da Paixão Duarte, A.M., I. Saur-Amaral & G.M. do Carmo Azevedo. (2015). IFRS Adoption and Accounting Quality: A Review. Journal of Business & Economic Policy 2(2): 104-123.
13. Dang, T.L., M. Dang, L. Hoang, L. Nguyen & H.L. Phan. (2020). Media coverage and stock price synchronicity. International Review of Financial Analysis 67: https://doi.org/1016/10/j.irfa.101430/2019.
14. DellaVigna, S., & J. Pollet. (2009). Investor inattention and Friday earnings announcements. Journal of Finance 64(2): 709–749.
15. Demerjian, P.R., B. Lev, M.F. Lewis & S.E. McVay. (2013). Managerial ability and earnings quality. The Accounting Review 88(2): 463-498.
16. Dimitropoulos, P.E., & D. Asteriou (2010). The Effect of Board Composition on the Informativeness and Quality of Annual Earnings: Empirical Evidence from Greece. Research in International Business and Finance 24: 190–205.
17. Dong, M., D. Hirshleifer, S. Richardson & S.H. Teoh. (2006). Does investor misevaluation drive the takeover market?. The Journal of Finance 61: 725–762.
18. Drake, M.S., J.N. Myers & L.A. Myers. (2009). Disclosure quality and the mispricing ofaccruals and cash flow. Journal of Accounting, Auditing & Finance 24: 357–84. Doi:10/1177/0148558X0902400303, 357-384.
19. Durnev, A., Morck, R., Yeung, B. (2004). Value‐enhancing capital budgeting and firm‐specific stock return variation. The Journal of Finance 59(1), 65-105.
20. Easley, D., S. Hvidkjaer & M. O'Hara. (2002). Is Information Risk a Determinant of Asset Returns?. The Journal of Finance 57(5): 2185-2221. https://doi.org/10.1111/1540-6261.00493.
21. Fama, E. (1970) Efficient Capital Markets A Review of Theory and Empirical Work. The Journal of Finance 25: 383-417
22. Fama, E.F., & K.R. French. (1993). Common Risk Factors in the Return on Stocks and Bonds. Journal of Finance 33: 3–56
23. Fu, J., Chen, X., Liu, Y., & Chen, R. (2022). Managerial ability and stock price synchronicity. Research in International Business and Finance, 60(1), 10/10/16j.ribaf.2021/101606.
24. Haga, J., K. Högholm & D. Sundvik. (2022). Peer firms’ reporting frequency and stock price synchronicity: European evidence. Journal of International Accounting. Auditing and Taxation 49: 100505-100520.
25. Han, Y., Huang, D., Huang, D., & Zhou, G. (2022). Expected return, volume, and mispricing. Journal of Financial Economics 143(3): 1295–1315.
26. Hirshleifer, D., S. Lim & S.H. Teoh. (2009). Driven to distraction: extraneous events and under reaction to earnings news. Journal of Finance 64(5): 2289–2325.
27. Hou, X., & R. Yang. (2021). Policy signaling and stock price synchronicity: Evidence from China. Journal of International Financial Markets. Institutions and Money 75: https://doi.org/1016/10/j.intfin.101355/2021
28. Hutton, A.P., A.J. Marcus & H. Tehranian. (2009). Opaque Financial Reports, R2, and CrashRisk. Journal of Financial Economics 94: 67-86.
29. Jin, L., & S. Myers. (2006). R2 around the world: new theory and new tests. Journal of Finance 79: 257-292.
30. Jones, J.J. (1991). Earnings management during import relief investigations. Journal of Accounting Research 29(2): 193–228.
31. Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of Accounting Research 37(1): 57-81.
32. Kent, D., & D. Hirshleifer. (2015). Overconfident Investors, Predictable Returns, and Excessive Trading. Journal of Economic Perspectives 29 (4): 61–88. DOI: 10.1257/jep.29.4.61.
33. Khan, M. (2008). Are accruals mispriced? Evidence from tests of an intertemporal capital asset pricing model. Journal of Accounting and Economics 45(1): 55–77.
34. Kothari, S.P., A.J. Leone & C.E. Wasley. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics 39: 163197.
35. Lettau, M., & S.C. Ludvigson. (2001). Consumption, Aggregate Wealth and Expected Stock Returns. Journal of Finance 56: 815-849.
36. Leung, W.S., K.P. Evans & K. Mazouz. (2020). The R&D anomaly: Risk or mispricing?. Journal of Banking and Finance 115: Article 105815.
37. Li, Ch., X. Liu, Zh. Hou & Y. Li. (2022). Retail Investor Attention and Equity Mispricing: The Mediating Role of Earnings Management. Finance Research Letters 2022:103621.
38. Lyu, Y., H. Yi, Y. Wei & M. Yang. (2021). Revisiting the Role of Economic Uncertainty in Oil Price Fluctuations: Evidence from a New Time-varying Oil Market Model. Economic Modelling, Elsevier 103(C).
39. McNichols, M., & S. Stubben. (2008). Does earnings management affect firms’ investment decisions. The Accounting Review 83: 1571 –1603.
40. Merton, R.C. (1987). A simple model of capital market equilibrium with incomplete information, Journal of Finance 42(3): 483-510.
41. Morck, R., B. Yeung & W. Yu. (2000). The information content of stock markets: why doemerging markets have synchronous stock price movements?. Journal of Financial Economics 58: 215-260.
42. Pantzalis, C., & J.C. Park. (2013). Agency Costs and Equity Mispricing. WWW.ssrn.com. pp 1-40.
43. Pantzalis, C., & J.C. Park. (2014). Agency costs and equity mispricing. Asia-Pacific Journal of Financial Studies 43(1): 89–123.
44. Piotroski, J.D., & D.T. Roulstone. (2004). The influence of Analysts, Institutional Investors, and Insiders on the incorporation of Market, Industry, and Firm-specific information into stock prices. The Accounting Review 79(4): 1119-1151.
45. Polk, C., & P. Sapienza. (2009). The stock market and corporate investment: A test of catering theory. Review of Financial Studies 22(1): 187–217.
46. Rhodes-Kropf, M.D., T. Robinson & S. Viswanathan. (2005). Valuation waves and merger activity: The empirical evidence. Journal of Financial Economics 77(3): 561–603.
47. Roll, R. (1988). R2. Journal of Finance 43: 541-566.
48. Shleifer, A., & R.W. Vishny. (2003). Stock market driven acquisitions. Journal of Financial Economics 70(3): 295–311.
49. Syed, A.M., & I.A. Bajwa. (2018). Earnings announcements, stock price reaction and marketefficiency–the case of Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management 11(3): 416-431.
69.  
Send email to the article author

Add your comments about this article
Your username or Email:

CAPTCHA

XML   Persian Abstract   Print

Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Vaghfi S H, Seddighi J, Hosseini S E, Pakdelan S. The Effect of Stock Price Synchronicity on Mispricing with an Emphasis on the Role of Financial Reporting Quality. fa 2023; 15 (60) : 3
URL: http://qfaj.mobarakeh.iau.ir/article-1-2683-en.html
Rights and permissions
Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
year 15, Issue 60 (2023) Back to browse issues page
فصلنامه حسابداری مالی Quarterly Financial Accounting
Persian site map - English site map - Created in 0.04 seconds with 37 queries by YEKTAWEB 4679