An Empirical Research On Information Disclosure Quality And Systematic Risk Of Stock Return For The Listed Firms

Disclosure has always been the focus of Modern Capital Market Theory. It originates from the"Information Asymmetry"and the"Agency Cost"problems between managers and outside investors. Increasing the firm's information transparency has good effect on both the investors and the firm. On the one hand, from the perspective of investors, they can have better understanding of the firm's operation and their investment with the information. On the other hand, from the perspective of the firm, improving the disclosure quality will bring lots of economic consequences, including improved liquidity for their stock in the capital market; reductions in their cost of capital; increased following by information intermediation; improved corporate governance and reductions in stock market return variation proportion.According to the specific background of Chinese capital market, many domestic researchers engage in the empirical study on the economic consequences referred above. However, there is little study on the relation between information disclosure quality and stock return systematic risk. This paper covers a sample of non-financial companies listed in Shenzhen Stock Exchange (the sample of Year 2005 is 290, while the sample of period from Year 2000 to Year 2005 is 279). We use Earnings Aggressiveness and Earnings Smoothing to proxy for the information disclosure quality, and empirically investigate their effects on R2 calculated by weekly return in Year 2005 and monthly return for the period from Year 2000 to Year 2005 respectively after controlling some measures including firm size, financial leverage, firm growth and corporate governance. The results show that Earnings Aggressiveness is significantly positively related to R2 in both models, while Earnings Smoothing is significantly negatively related to R2 in the model period from Year 2000 to Year 2005, indicating that the more the earnings opacity is, the higher R2 is. Moreover, we add industry measure into models period from Year 2000 to Year 2005 to construct two new models. The results demonstrate that the significance between Earnings Aggressiveness and R2 is decreased after controlling industry measure, while the significance between Earnings Smoothing and R2 is increased.This paper is organized by five chapters in all. Chapter 1 brings forward the background, the research motives and the framework of this paper. However, Chapter 2 includes literature review concerning information disclosure, stock return risk and domestic related research and empirical findings. Chapter 3 is about the research design, we introduce the sample selecting process and each variable's definition in detail. Furthermore, we establish regression models for our empirical research and make research hypothesis as well. The content of Chapter 4 is description and analysis of the empirical results. At first we analyze regressions results in Year 2005 and period from Year 2000 to Year 2005 respectively, and then we compare these results together and analyze them in a further step. After that we add industry measure to make a deeper analysis. The last Chapter gives the conclusion of this whole paper, pointing out the limitation in this research and the future direction of this study.The main conclusion getting from this empirical research paper is that the disclosure quality indeed effects the firm's stock market return variation. In detail, when the research period is short, the explanation power of Earnings Aggressiveness is better; when the research period is long, the explanation power of Earnings Smoothing is better. We suggest that the supervision department should take measures to improve the listed firms'disclosure quality to make sure the development of stock market of China.