The Impact Of Corporation Governance On The Information Content Of Financial Reports

Since the1960s, the research on the information content of financial reports has always been concerned. There are many factors that affect the information content of financial reports, such as enterprise accounting standards, the firm characteristics, national policy and corporate governance structure. Corporate governance structure, one of the most important factors, includes the ownership structure, board structure and supervisory board structure. Different corporate governance structures have different effects on the information content of financial reports. At the same time, in China, most of the listed companies stem from restructured state-owned enterprises, so their governance structure is unique. This article investigates the impact of our companies’ corporate governance structure on the information content of financial reports from the perspectives of theory and demonstration. At first, combining present situation of corporate governance in our country, this article theoretically analyses how corporate governance influence the information content of financial reports, how different corporate governance structure influence the information content of financial reports differently. Then on the basis of theoretical analysis, this article conducts empirical test. First of all, it test the information content of financial reports in China by using the data of2005-2010A-share companies that listed in the Main Board of Shanghai and Shenzhen stock exchange, and then it makes an empirical analysis on the relationship between corporate governance and the information content of financial reports by using the data of2010samples. In this part of the article, the samples are grouped according to ownership structure or board structure, then it make regression analysis respectively. The results shows that:(1) the information content of financial reports in China’s listed companies is low;(2) the informativeness of financial reports is a concave function of the share of the controlling shareholder;(3) compared with non-state-owned companies, the informativeness of financial reports of the state holding listed companies is lower;(4) the greater the power of restriction between other shareholders and the controlling shareholder is, the higher the informativeness of financial reports;(5) the greater the proportion of independent directors in the board is, the higher the informativeness of financial reports:(6) the board director holding a CEO concurrently increases the informativeness of financial reports;(7) The larger the director board size is, the higher the informativeness of financial reports is;(8) The larger the supervisory committee size is, the higher the informativeness of financial reports is. Through this study, it hopes to give some policy suggestions on the improvement of the corporate governance structure and enrich the field of the information content of financial reports. This study could help investors make investment decision. It also could help securities market supervision department strengthen supervision, then ensure the quality of financial reports, and improve the information content of financial reports.