Ownership Structure and Corporate Voluntary Disclosure

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The International Journal of Accounting 37 (2002) 247 – 265

Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore Gerald K. Chaua, Sidney J. Grayb,*

Hong Kong Polytechnic University, Hong Kong, China School of International Business, University of New South Wales, Quadrangle Building, Sydney, NSW 2052, Australia


Abstract Drawing on prior empirical research based on disclosure behavior in developed western markets, this study examines the association of ownership structure with the voluntary disclosures of listed companies in the Asian settings of Hong Kong and Singapore. An analysis of annual reporting practices shows that the extent of outside ownership is positively associated with voluntary disclosures. In particular, the results also indicate that the level of information disclosure is likely to be less in ‘‘insider’’ or family-controlled companies, a significant feature of the Hong Kong and Singapore stock markets. D 2002 University of Illinois. All rights reserved. Keywords: Voluntary disclosures; Agency theory; Hong Kong; Singapore

1. Introduction Corporate voluntary disclosure has been the focus of an increasing amount of attention in recent years. Such disclosures 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’’ (Meek, Roberts, & Gray, 1995, p. 555). Studies in this area have mainly focused on the impact of company characteristics on the extent of voluntary disclosure. Understanding why

* Corresponding author. Tel.: +61-2-9385-6442; fax: +61-2-9385-6440. E-mail address: s.gray@unsw.edu.au (S.J. Gray). 0020-7063/02/$ – see front matter D 2002 University of Illinois. All rights reserved. PII: S 0 0 2 0 - 7 0 6 3 ( 0 2 ) 0 0 1 5 3 - X


G.K. Chau, S.J. Gray / The International Journal of Accounting 37 (2002) 247–265

firms disclose information voluntarily is useful to both the preparers and users of accounting information as well as to accounting policymakers (Meek et al., 1995). However, the focus of much of the research to date has been on the US, the UK, and Continental European countries (e.g., Buzby, 1975; Cerf, 1961; Choi, 1973; Cooke, 1989; Firth, 1979; Frost & Pownall, 1994; Gray, Kouhy, & Lavers, 1995; Meek & Gray, 1989; Meek et al., 1995; Turpin & DeZoort, 1998). In contrast, very few studies (e.g., Cooke, 1991; Hossain, Tan, & Adams, 1994; Lau, 1992) have been concerned with the nature and extent of corporate voluntary disclosure in Asian countries. Accordingly, this study aims to examine the voluntary disclosure behavior of listed companies from two important Asian markets, namely, Hong Kong (China) and Singapore. Hong Kong and Singapore are the focus of this study, first, because of their unique and similar backgrounds as emerging market economies with rapidly growing capital markets. Total market capitalization of the Hong Kong capital market has increased more than seven times from US$83,386 million to US$608,159 million during 1990–1999 (Stock Exchange of Hong Kong (SEHK), 1999). Similarly, it has increased more than nine times from US$21,124 million to US$192,983 million for the Singapore capital market during the same period (SEHK, 1999). In 1999, Hong Kong ranked as the second largest and Singapore the fourth largest economics in Asia in terms of market capitalization (SEHK, 1999). The Hong Kong and Singapore capital markets have both increased in importance and are keenly competing to be among the leading stock market locations in Asia outside Japan. So not only is more research needed on these markets, but also an assessment of similarities and differences in disclosure behavior is likely to be insightful. Second, voluntary disclosure deserves special attention in the Asian context because firms in these countries have less incentives for transparent...
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