Corporate value creation, stock price synchronicity and firm value in China: implications for beyond

• Published in: Journal of accounting in emerging economies Vol. 12; no. 3; pp. 566 - 588
• Main Authors: Zhang, Ruopiao, Chu, Teresa, Noronha, Carlos, Guan, Jieqi
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Publishing Limited 09.05.2022; Emerald Group Publishing Limited
• Subjects: Annual reports; Asymmetry; Disclosure; Earnings per share; Emerging markets; Hypotheses; Investments; Investors; Noise; Social responsibility; Stock exchanges; Stock prices; Sustainability; Sustainability management; Sustainable development; Value creation; China; Emerging economies; SCVPS; Firm value; Corporate value creation; Stock price synchronicity
• ISSN: 2042-1168; 2042-1176
• DOI: 10.1108/JAEE-06-2021-0212

PurposeThis study introduces Social Contribution Value per Share (SCVPS), an indicator devised by the Shanghai Stock Exchange (SSE), as an easy-to-interpret Measurement of Corporate Social Performance (MCSP) to the international research arena. The authors first explore the informativeness role of voluntary disclosure of SCVPS in the stock market. The authors then go one step further to demonstrate the relationship between corporate value creation quantified by SCVPS and firm value.Design/methodology/approachThe study takes a new perspective – a quasi-natural experiment of SCVPS disclosure in 2008 and uses a Propensity Score Matched Difference in Difference model (PSM-DiD) to investigate the impact of SCVPS disclosure policy on stock price synchronization and firm value. Through manually recalculating all the values of SCVPS and its components, this study enables us to further investigate the relationship between corporate value creation for various stakeholders and firm value.FindingsThis study reveals that voluntary disclosure of SCVPS can signal firm-specific information to the market and reduce noise in returns, thus affecting stock price synchronization. The findings further demonstrate that such firm-specific information has value relevance to firm performance. Moreover, the authors demonstrate that corporate value creation for different stakeholders measured by SCVPS can significantly affect firm value. The moderating effects of ownership structures and industry types are also investigated, and an endogeneity test confirms the robustness of the findings.Practical implicationsThis study argues that SCVPS offers an economically viable way for firms, including small-and-medium-sized enterprises, in emerging economies to disclose corporate value creation and provide the public with a direct understanding and appreciation of the values created by corporations for stakeholders.Originality/valueThe result makes contributions to the MCSP literature and explores the informativeness of SCVPS disclosure. Besides, this paper demonstrates that SCVPS offers a good setting to explore the effect of corporate value creation on firm performance in an emerging market.