Empirical Research About The Effects Of Corporate Governance On Voluntary Disclosure

Voluntary disclosure can be defined as disclosures in excess of requirements, representing free choices on the part of company managements to provide accounting and other information deemed relevant to the decision needs of users of their annual reports. There is a close relationship between corporate governance and voluntary disclosure. Foreign scholars have done lots of empirical research on this relationship. Because of the unique economy environment, legal framework, traditional culture and unique feature of corporate governance of listed Chinese companies, many foreign research results on voluntary disclosure are not fit for listed Chinese companies effectively. While internal scholars have done a little on it, this paper analyzes the effects of corporate governance of listed Chinese compabies on voluntary disclosure systematically and examines this relationship empirically. Then provides support and policy suggestion on improving corporate voluntary disclosure.Firstly, this paper analyzes the influences of internal governance including ownership structure, board effectiveness and manager incentives on voluntary disclosure of listed Chinese companies. Then selecting 401 companies listed on the shanghai stock exchange in 2004 as our samples, we examine empirically the effects of ownership structure and board effectiveness on voluntary disclosure. And divide the samples into low-voluntary disclosure group and high-voluntary disclosure group to make further analysis. The results show that: (1) in the total sample group and high voluntary disclosure score sample group, proportion of legal person ownership, the quantity of institutional investors in the first ten shareholders, proportion of independent director, number of the board of directors'meeting and audit committee are positively associated with voluntary disclosure; while proportion of state ownership, CEO duality, the absence ratio of independent director participated in the board of directors'meeting, proportion of independent director who hold independent directorships of other listed companies are negatively related to voluntary disclosure; as for the concentration of ownership, proportion of the first five shareholders and the first ten shareholders are both inverse-U related to voluntary disclosure, while proportion of the first shareholders is not related to voluntary disclosure; proportion of liquid share, board size, total annual compensation of top three directors, annual compensation of independent director, proportion of director ownership and CEO change are not related to voluntary disclosure. (2) in the low voluntary disclosure score sample group, only number of the board of directors'meeting is positively associated with voluntary disclosure. Other variables are not related to voluntary disclosure. We also find that larger firms and firms with equity demand are more clines to voluntary disclosure.Secondly, this paper analyzes the effect of external governance including product market, executive market, control right market and information intermediaries on voluntary disclosure of listed Chinese companies. We introduce theory of behavior finance and investigate how information intermediaries influence corporate voluntary disclosure through establishing a game under asymmetrical information. The conclusion is: Along with the increase of information intermediary, listed companies will disclosure private information in order to lead the herding behavior of information intermediaries, control the information that would be transferred to competitor and keep competition superiority, even if this action will increase the proprietary cost. Finally, we test the joint effect of managerial ownership and product market competition on voluntary disclosure empirically. We select 365 companies listed on the shanghai stock exchange in 2004 as our samples. The results indicate that managerial ownership is negatively associated with the extent of voluntary disclosure when the degree of competition the company faces is low; this relationship does not exist when competition is high. In addition, firms with lower competition and higher managerial ownership are less likely to make additional disclosures.Thirdly, we bring forward policy suggestions on improving voluntary disclosure based on the empirical results of our empirical research. The propositions are: (1)deepening the description of government and corporate, clarifying ownership and further perfecting state-owner corporate governance structure; (2) encouraging institutional investors to balance the ownership structure; (3)increasing the number of the board of directors'meeting appropriately and perfecting the standing orders of directors'board; (4) perfecting the independent director system to exert the supervisory role adequately. (5) establishing the audit committee system to strengthen the functions of audit committee;(6) fostering product market competition system; (7)pushing the development of information intermediary industry and encouraging information intermediary organizations to rate the level of voluntary disclosure of listed Chinese companies regularly.