Information environment and stock price synchronicity: Evidence from auditor characteristics
The interpretation of stock price synchronicity in relation to price informativeness is controversial in the literature. We examine how firm-specific variation relates to the quality of a firm's information environment by considering two auditor characteristics—audit firm size and audit firm tenure. Using a sample of U.S. listed firms from 2000 to 2018, we find that Big N audits and longer audit firm tenure are associated with higher stock price synchronicity and lower idiosyncratic risk. Our findings suggest that firm-specific variation captures noise rather than firm-specific news, supporting the emerging view that stock price synchronicity is a direct measure of price informativeness.
International Journal of Auditing
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Cahan, Steven; Lam, Brian M.; Li, Lina Z.; and Rahman, Md Jahidur, "Information environment and stock price synchronicity: Evidence from auditor characteristics" (2021). Kean Publications. 953.