Investor Service Center Shareholding and Stock Price Synchronicity—Based on a Quasi-natural Experiment

Abstract

Abstract: Protecting small and medium investors properly has been viewed as the internal requirement for high-quality development of capital market. The China Securities Investor Service Center (CSISC) established by China Securities Regulatory Commission in 2014 is an important institutional innovation for this purpose. In February 2016, the CSISC has been the public welfare shareholder of listed firms located in Shanghai, Hunan and Guangdong firstly. We utilize the above quasi-exogenous event to construct a difference-in-difference model and investigate the impact of CSISC shareholding on the capital market information efficiency. We find that compared with listed companies located in non-pilot provinces, the stock price synchronization of listed companies located in the pilot areas is significantly lower, which represents the improvement of capital market information efficiency. The mechanism tests show that CSISC shareholding mainly affects the stock price synchronization through improving the information environment and promoting the activism of small and medium investors. Heterogeneity analysis finds that the above relationship is more pronounced in samples with lower protection degree of investors, higher institutional shareholdings and higher media attention. This paper not only expands the research perspectives of the CSISC shareholding and stock price synchronization respectively, but also provides plausible solution about how to improve China capital market information efficiency through the protection of small and medium investors.

Key words: investor service center, stock price synchronicity, protection of small and medium investors, capital market information efficiency

Sun Zeyu, Sun Fan. Investor Service Center Shareholding and Stock Price Synchronicity—Based on a Quasi-natural Experiment[J]. Management Review, 2024, 36(2): 194-209.

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