Voluntary Disclosure of Listed Chinese Companies~2008-2012: An Empirical Study

Abstract

The Chinese stock exchanges are an integral part of Chinese and global economy having a combined market capitalization of 3697 billion USD at end of year 2012. Due to their size and economic impact it is important that they maintain growth and stability. Writers have maintained that voluntary corporate disclosure can help to achieve growth and stability thus the aim of this research is to examine recent Chinese listed companies’ voluntary disclosure practice.

The purpose of this study is to investigate voluntary disclosure level of top 50 listed Chinese companies on Shanghai Stock Exchange during 2008-2012 period.

This study primarily utilizes a quantitative approach. The author constructs a Voluntary Disclosure Index (VDI) based on legislative/regulatory consideration, investor demand, investor sophistication and previous studies. This VDI score is then used to measure companies’ voluntary disclosure level.

The results of this study indicate that the overall voluntary disclosure level did not increase during 2008-2012, rather it dropped. Some interesting findings about disclosure level and individual disclosure item scores in certain disclosure categories stood out; for example, nearly all companies detached their CSR report or sustainability report from their annual reports in 2010, resulted a sharp decline in voluntary disclosure level in certain related disclosure category. Further there was little employment information disclosed particularly of note are the areas of minority and gender, and little forward looking corporate focused financial information as opposed to general economic expectations was disclosed.

By using more recent data and considering the changes in China’s corporate disclosure regulation system in recent years, this study addresses certain gaps from previous Chinese studies. This study also explores some regulatory loopholes in China’s disclosure regulation system and certain insufficiencies in investors’ education, thus this study can be of value to policy makers. Overall it is hoped that this study can lead to greater engagement between Chinese corporations and investors particularly in the area of voluntary disclosure.