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Information transparency and stock sentiment beta: Evidence from China

Author

Listed:
  • Jian Wang

    (School of Business Administration, Northeastern University, Shenyang, China†Institute of Behavioral and Service Operations Management, Northeastern University, Shenyang, China)

  • Jiatuo Xu

    (School of Business Administration, Northeastern University, Shenyang, China)

  • Xiaoting Wang

    (��Department of Economics, Acadia University, Wolfville, NS, Canada)

  • Ting Liu

    (School of Business Administration, Northeastern University, Shenyang, China)

  • Jun Yang

    (�F. C. Manning School of Business Administration, Acadia University, Wolfville, NS, Canada)

Abstract

Stock returns demonstrate different levels of sensitivity to marketwide sentiment fluctuations. Previous studies argue that stock sentiment risk is caused by information opacity and that companies lacking information transparency tend to be young, small, paying no dividend, volatile, and fast growing. However, little direct evidence exists regarding the impact of information transparency on stock sentiment sensitivity/beta. This paper contributes to fill this gap by employing proximate measures of information transparency: quality of accruals and earnings, and accuracy of analyst forecast. Empirical results validate that information transparency indeed helps curb stock sentiment beta. Such an impact is more pronounced during periods of low market sentiment when irrational investors are mostly sidelined. Two mediating factors are identified: noise trading and stable institutional shareholding. Additionally, improving information transparency on corporate governance also constrains stock sentiment sensitivity. Our results are robust to alternative measures and the endogeneity concern.

Suggested Citation

  • Jian Wang & Jiatuo Xu & Xiaoting Wang & Ting Liu & Jun Yang, 2025. "Information transparency and stock sentiment beta: Evidence from China," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 1-38, March.
    • Handle: RePEc:wsi:ijfexx:v:12:y:2025:i:01:n:s2424786324500087
    DOI: 10.1142/S2424786324500087
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    Keywords

    Stock sentiment sensitivity; information transparency; noise trading; institutional investors;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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