Does CEO-chairman dialect similarity affect stock price informativeness for Chinese listed firms?

• Published in: The North American journal of economics and finance 2021-01, Vol.55, p.101313, Article 101313
• Main Authors: Fu, Yishu, Liu, Chunbo, Qin, Zhenjiang
• Format: Article
• Language: English
• Subjects: CEO-chairman dialect similarity (CCDS); China; Stock price informativeness
• ISSN: 1062-9408; 1879-0860
• DOI: 10.1016/j.najef.2020.101313

•CEO-chairman dialect similarity (CCDS) leads to more informative stock prices for Chinese listed firms.•Stronger corporate governance mitigates the adverse impact of CCDS on stock price informativeness.•Mutual trust between the CEO and the chairman is the channel through which CCDS improves stock price informativeness. Does CEO-chairman dialect similarity (CCDS) affect stock price informativeness? Based on a sample of Chinese publicly listed firms for the period of 2012–2017, we find that CCDS significantly improves stock price informativeness. Our result implies that CCDS increases the loyalty of managers to their board, and deters them from extracting private benefits, which leads to more informative stock prices. Furthermore, our subsample analyses show that this relationship between CCDS and stock price informativeness is only found in firms that have more media coverage, higher institutional ownership and a non-busy board. Our results also suggest that mutual trust between the CEO and chairman is a possible channel through which CCDS improves stock price informativeness.