Management Ownership and Stock Price Informativeness in Indonesia Stock Market

This paper investigates the impact of management ownership i.e. director's and commissioner's shares, on the amount of firm-specific information incorporated into stock prices, as measured by stock price synchronicity of Indonesian-listed firms over the 2013- 2015 period. Studies have shown that at least there are two effects of management ownership in prices i.e. convergence-of-interests effect and entrenchment effect. Also, previous research shows that stock price efficiency depends on the cost of acquiring private information. We hypothesize that these characteristics will manifest itself primarily in the firm-specific component of returns. Our empirical test finds that director's and commissioner's ownership in a company nonlinearly increase the probability of capitalization of firm's specific information to stock prices. Thereby, making firm's stock prices less synchronous to the market and the industry movements. Overall, our findings support the contention that ownership structure plays a significant role in shaping the firm's information environment.