Stock Price Synchronicity andCorporate Governance Practices

This study examines the association between stock price synchronicity and corporate governance practices. Utilizing a unique data set on firm-level corporate governance practices provided by the Korea Corporate Governance Service (KCGS), this study examines whether sound corporate governance practices increase firm-specific information and thus, reduce stock price synchronicity. This study also investigates whether corporate governance practices can predict stock return skewness. This study finds that (1) sound corporate governance practices are negatively related to stock price synchronicity; (2) further, sound corporate governance practices are negatively related to stock return skewness; (3) this association becomes stronger in simultaneous equations estimation with analyst following and corporate governance practices; and (4) of the five corporate governance practices, shareholder rights protection is most closely related to stock price movement. Overall, this study suggests that sound corporate governance practices play an important role in influencing stock price movement.