A Case Study of Voluntary Disclosure by Chinese Enterprises

Abstract

This study examines the impact of companies’ ownership features, corporate governance mechanisms, and firm-specific characteristics on the voluntary disclosure provided by publicly-listed companies on the Shanghai Stock Exchange Market in China. The features of  ownership structure and corporate governance mechanisms include (1) ownership concentration; (2) ownership by state and state-related institutions; (3) individual ownership; (4) the chief executive officer is also the chairman of the board of directors; (5) independence of the board, and (6) existence of an audit committee.  The firm-specific characteristics are (1) firm size; (2) leverage; (3) profitability, and (4) type of industry. With the use of a relative disclosure index for measuring the voluntary disclosure level, our results indicate that individual ownership, the existence of an audit committee, firm size, and leverage are significantly related to the extent of voluntary disclosure. The study provides empirical evidence for policy makers and regulators in China for improving corporate governance mechanisms and the transparency of publicly-listed companies. The findings also contribute to an understanding of disclosure behavior among former wholly state-owned enterprises during the privatization process in China.

JEL Classifications: M40, M41, M48