National Culture of Secrecy and Stock Price Synchronicity: Cross-Country Evidence

56 Pages Posted: 3 Feb 2021 Last revised: 5 Nov 2024

See all articles by Chrysovalantis Gaganis

Chrysovalantis Gaganis

University of Crete - Faculty of Social Sciences - Department of Economics

George N. Leledakis

Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Fotios Pasiouras

GSCM-Montpellier Business School

Emmanouil G. Pyrgiotakis

University of Essex - Essex Business School

Date Written: January 19, 2021

Abstract

This study investigates the relationship between the culture of secrecy and stock price comovement using a large sample of firms in 49 countries over the period 1990 to 2019. We find that stock prices in secretive societies comove more than stock prices in less secretive societies. This higher comovement occurs primarily because idiosyncratic volatility is lower. We attribute this finding to cultural biases in secretive societies which deter investors’ information-seeking behavior. To support these conjectures, we provide evidence of stronger mean reversals (less informed trading) in these societies. Our results persist when we account for cross-country differences in firms’ liquidity and information asymmetry, and when we control for cash flow uncertainty. Finally, the enforcement of insider trading laws in secretive countries is associated with less privately informed trading and lower idiosyncratic volatility.

Keywords: Culture, Information and market efficiency, Stock price synchronicity

JEL Classification: G14, G41, E71

Suggested Citation

Gaganis, Chrysovalantis and Leledakis, George N. and Pasiouras, Fotios and Pyrgiotakis, Emmanouil G., National Culture of Secrecy and Stock Price Synchronicity: Cross-Country Evidence (January 19, 2021). Available at SSRN: https://ssrn.com/abstract=3769565 or http://dx.doi.org/10.2139/ssrn.3769565

Chrysovalantis Gaganis

University of Crete - Faculty of Social Sciences - Department of Economics ( email )

University Campus
Rethymno, Crete, 74100
Greece

HOME PAGE: http://economics.soc.uoc.gr/en/staff/4551/17

George N. Leledakis (Contact Author)

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Str.
Athens, 104 34
Greece
+30 210 8203 459 (Phone)
+30 210 8228 816 (Fax)

HOME PAGE: http://www.aueb.gr/en/faculty_page/leledakis-georgios

Fotios Pasiouras

GSCM-Montpellier Business School ( email )

2300, Avenue des Moulins
Montpellier, 34185
France

Emmanouil G. Pyrgiotakis

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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