Aggressive reporting, investor protection and stock price informativeness: Evidence from Chinese firms

This paper investigates the impact of aggressive reporting on the ability of stock prices to inform in Chinese firms. Using both stock price synchronicity and the probability of informed trading as proxies for stock price informativeness, we find that aggressive reporting damages the ability of stock prices to inform in Chinese firms. Our findings are robust to potential endogeneity and the use of alternative aggressive-reporting measures. Finally, we find that the impact of aggressive reporting in reducing stock price informativeness is stronger in firms located in regions of weaker institutional development and in private sectors firms.