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How does high-speed railway opening affect stock price synchronicity?

Author

Listed:
  • Zhou, Lei
  • Wang, Yuansheng
  • Bai, Caiquan
  • Xiao, Weiwei

Abstract

This study uses the standard R2-based method to calculate the stock price synchronicity of listed firms in China's A-share market from 2005 to 2019 and the difference-in-differences (DID) method to examine the impact of high-speed railway (HSR) opening. The results show that HSR opening significantly weakened stock price synchronicity. However, its weakening effect only existed for three years. The mechanism tests indicate that HSR opening enabled analysts as information intermediaries to disseminate more firm-specific information to the market, thereby weakening stock price synchronicity. The heterogeneity tests show that the weakening effect mainly worked in large-cap listed firms and firms in regions with a medium level of financial agglomeration. Additionally, HSR opening could further reduce the cost of equity capital of listed firms by promoting the dissemination of firm-specific information.

Suggested Citation

  • Zhou, Lei & Wang, Yuansheng & Bai, Caiquan & Xiao, Weiwei, 2023. "How does high-speed railway opening affect stock price synchronicity?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 154-177.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:154-177
    DOI: 10.1016/j.iref.2023.06.009
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    References listed on IDEAS

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    1. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
    2. Gupta, Kartick & Krishnamurti, Chandrasekhar & Tourani-Rad, Alireza, 2013. "Is corporate governance relevant during the financial crisis?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 85-110.
    3. Datta, Saugato, 2012. "The impact of improved highways on Indian firms," Journal of Development Economics, Elsevier, vol. 99(1), pages 46-57.
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    More about this item

    Keywords

    HSR opening; Stock price synchronicity; Firm-specific information dissemination; Analyst coverage;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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