Corporate voluntary disclosure and the separation of cash flow rights from control rights |
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Authors: | Kin-Wai Lee |
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Institution: | (1) Division of Accounting, Nanyang Business School, Nanyang Technological University, S3-B2A-19 Nanyang Avenue, Singapore, 639798, Singapore |
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Abstract: | We find that corporate voluntary disclosure is negatively associated with the separation of cash flow rights from control
rights. This result is consistent with the notion that as the separation of cash flow rights from control rights increases,
controlling owners have larger incentives to expropriate the wealth of minority shareholders and low corporate disclosure
constitutes a mechanism to facilitate controlling owners in masking their private benefits of control. The negative association
between voluntary disclosure and the separation of cash flow rights from control rights is less pronounced for firms with
greater external financing needs. This result suggests that for firms with high separation of cash flow rights from control
rights, those with greater external financing needs undertake higher firm-level voluntary disclosure to reduce information
asymmetry. We also find that the negative association between voluntary disclosure and the separation of cash flow rights
from control rights is less pronounced for firms that have a large non-management shareholder. Our result supports the role
of large non-management shareholder in mitigating agency problems associated with the separation of ownership and control.
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Keywords: | Voluntary disclosures Agency costs Corporate governance |
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