A Study On The Relationship Between The Ultimate Controllers And The Information Disclosure Quality Of Listed Companies In China

The listed company is constituded by the shareholders, creditors, managers, employees,costomers, government and public stakeholders. The various stakeholders need to makedecisions based on the information provided by the listed companies. In the other hand, listedcompanies are important parts of the stock market; the information disclosed by them is thecommunication between the prices of securities and the corporate value. The quality of theinformation disclosed impacts the efficiency of resource allocation directly in the stockmarket. But the behavior of disclosing information is not always perfect. There are still lots ofproblems about the disclosure information in China. The scandals not only seriously damagethe confidence of the investors, but also shake the foundation of the stock market. Therefore,how to improve the quality of listed companies’ disclosure information effectively and tosupervise the disclosure information become the focus of government and scholars in everycountry.Since1999La Porta et al proposed the concept of ultimate controller, there were agrowing numer of studies about the ownership structure of the listed companies. The scholarsfound that the ownership structure is concentrated in the most of the time. When use10%asthe measure of the ultimate controller, it is found that most of listed companies in China haveultimate controllers. Because of control rights, the ultimate controllers have the power toimpact the behavior of listed companie, including the choice of disclosure strategy. So inorder to improve the quality of disclosure information, we have to consider the ultimatecontrollers. Based on this analysis, the paper builds the model of the relationship between theultimate controller and the quality of disclosure information, examing their relationship thetheoretically and empirically.The paper selects the listed companies of Shenzhen stock exchange in2007-2010as theresearch sample. First examine the differences of the quality of disclosure information underdifferent types and control mehods of the ultimate controllers. Then the paper empiricallytests how the controls righs, cash flow rights, separate of control righs and the cash flowrights and the control levels impact the disclosure information. The conclusions include: thereare significant differences between different catagoires which are different types and differentcontrol methods of the ultimate controllers. And when the control right of ultimate controllersis absolute control, it has a significantly negative impact on the quality of disclosureinformation. The cash flow rights impact the quality of disclosure information positively, the higher the cash flow rights, the better the quality. The separate and the control level have asignificantly negative impact on the quality of disclosure information. In the end, the paperproposes some suggestions to enhance the quality of disclosure information based on theanaylsis. We should focus on the non-state-controlled listed companies, and the pyramidstructures. And we have reduce the degree of diviation of control righs and the cash flowrights, reduce the control level of the pyramind structure, improve the corporate governanceenvironment, and improve the information disclosure mechanism.