A Study on Impact of Legal System, Regulatory System, and Foreign Investment on Stock Price Synchronicity in China

Tina T. He, Wilson X.B. Li and Gordon Y.N. Tang

Using 7,566 firm-year observations of Chinese listed firms over the period 2003-2008, this study examines the impact of legal system, regulatory system and foreign investment on stock price synchronicity. We find that legal system and regulatory system are negatively associated with stock price synchronicity with the effect of legal system stronger than regulatory system. However, a positive relation between the participation of foreign institutional investors and the stock price synchronicity is found which is inconsistent with the general views in this regard.

DOI : https://doi.org/10.21102/jbpr.2016.12.112.02