Voluntary Disclosure Of Listed Companies In China

Accounting information is a link between listed companies and the capital market. Adequate information disclosure can reduce information asymmetry during issuing securities, save transaction costs, avoid"adverse selection"of investors before signing a contract and suppress"internal control","moral hazard"and opportunism of the company managements.Accounting information disclosure can be divided into mandatory disclosure and 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. It has played an important role in capital market by enhancing the transparency and adequacy of information disclosure.After China has joined the WTO, more and more companies are facing the problem of financing in the foreign capital market and are urged to disclose more voluntary information in order to meet the investors'needs and reduce the pressure of competition. The capital market of china also needs to encourage voluntary disclosure in order to develop healthily and to meet the requirements of information transparency under the framework of the WTO. Therefore, it is important to find out the determinants of voluntary disclosure and the ways to encourage it. Empirical studies on voluntary disclosure are abundant in western countries while most researches in china are concentrated on the theoretical area and the empirical study is relatively rare .So this paper has focused on empirical study of the determinants of voluntary disclosure.This paper has four chapters. The main points of each chapter are as followings:Chapter 1: Introduction. This chapter has presented the meaning, the goal ,the approach and the framework of this research.Chapter 2: Theoretical basis of empirical study. This chapter has discussed the definition, history, theory basis and ways of voluntary disclosure. Besides, it also reviews the related literature on the study of motives and determinants of voluntary disclosure .Chapter 3: Empirical test of determinants of voluntary disclosure. The followings are main parts of this chapter:1. Sample and data. The sample for this paper is drawn from firms of information and technology industry listed on the Stock Exchanges of Shanghai and Shenzhen as at the end of 2005.There are 69 listed firms in total, excluding ST firms. Data on all independent variables were collected from the annual reports of the listed companies .All the annual reports were downloaded from the website of the Stock Exchanges of Shanghai and Shenzhen. Data on all but one dependent variable were gathered from the database of CSMAR. Data on quality of accounting office were collected from the website of Certified Public Accountant Committee of China.2. Voluntary disclosure index. The level of voluntary disclosure is measured by Voluntary disclosure index. Voluntary information is categorized into three types: Strategic information; Nonfinancial information; Financial information. Each type of information includes many items which constitute a voluntary information checklist. The voluntary disclosure index was compiled based on the unweighted scoring approach, of the disclosure items on the checklist. Such an approach was based on the assumption that each item of information disclosure is of equal importance in the corporate information users'decision-making process. This paper has modified the foreign experts'voluntary disclosure checklist and has established the checklist suitable to the mainland of China.3. Dependent variables. This paper has chosen 12 dependent variables. They are divided into three categories: Corporate governance variables, including managerial ownership, government ownership, block holder ownership, the proportion of outside directors, the existence of an audit committee and the existence of dominant personalities; Financial index variables, including return on assets, growth of assets and the ratio of liabilities to assets; Control variables, size of the company, quality of the auditor, foreign fund.4. Conclusions. Based on regression results, we find that significant managerial ownership, greater size of firms, bigger accounting office and greater assets growth are associated with increased voluntary disclosure, which are consistent with the hypotheses. But there are also two results which are opposite with the hypotheses and require future discussion: an increase in ROE reduces voluntary disclosure and greater block holder ownership increases voluntary disclosure. The other dependent variables, such as the ratio of liabilities to assets, the existence of an audit committee, the existence of dominant personalities, government ownership, the proportion of outside directors, the existence of an audit committee and foreign fund, are not related to voluntary disclosure.Chapter 4: Conclusions and policy advices. Based on the results of empirical study, this paper presents some advices on three aspects related to voluntary disclosure: form effective motivation mechanism for managers; encourage voluntary disclosure of listed firms; strengthen regulating of voluntary disclosure.The main contributions of this paper are as followings:1. Listed companies of information and technology industry have been chosen as the sample. Previous literature scarcely focused their research on a single industry.2. Voluntary information checklist has been effectively modified. This paper has modified the foreign experts'voluntary disclosure checklist and has established the checklist suitable to the information and technology industry of mainland of China.