Between a rock and a hard place: New evidence on the relationship between ownership and voluntary disclosure |
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| Affiliation: | 1. Graduate School of Economics, Waseda University, Japan;2. La Trobe Business School, La Trobe University, Australia;3. Faculty of Economics, Nagoya University of Commerce and Business, Japan;1. Department of Accounting and Finance, University of Vaasa, Wolffintie 34, 65200 Vaasa, Finland;2. Department of Finance, Texas A&M University, TAMU-4218, College Station, TX 77843-4218, United States;1. School of Management and Engineering, Nanjing University, Nanjing, Jiangsu 210093, China;2. School of Economics and Management, Tsinghua University, Beijing 100084, China;3. School of Management, Shanghai University of Engineering Science, Shanghai 201620, China;4. Faculty of Business, Athabasca University, Athabasca, Alberta T9S 3A3, Canada;5. Odette School of Business, University of Windsor, Windsor, Ontario N9B 3P4, Canada;1. Accounting and Finance, Adelaide Business School, The University of Adelaide, Level 12, 10 Pulteney Street, Adelaide, SA 5005, Australia;2. Banking and Finance, UNSW Business School, UNSW Sydney, NSW 2052, Australia;1. School of Finance, Nankai University, Tianjin 300350, PR China;2. College of Management and Economics, Tianjin University, Tianjin 300072, PR China;3. China Center for Social Computing and Analytics, Tianjin University, Tianjin 300072, PR China |
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| Abstract: | Combining two Swedish databases with unique strengths I show that stray firms, i.e. those lacking a controlling owner, have lower voluntary disclosure in financial reports (that is, information provided beyond what is formally required). This suggests managers prefer to withhold information to maximize their discretion over corporate policies. I also show that disclosure initially increases with block ownership, reflecting increased incentives to monitor and stronger governance. However, when block ownership exceeds a certain threshold level (> 50%), disclosure starts to decrease, reflecting another conflict of interest, namely between minority and controlling owners. Evidence of this non-linear relationship is novel in the literature and may account for the mixed evidence in previous research. Moreover, I report findings on the impact of institutional, foreign, under-diversified, and controlling minority-owners, concluding that ownership structure has major implications for voluntary disclosure. |
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