Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia

This study examines the relations between earnings informativeness, measured by the earnings-return relation, and the ownership structure of 977 companies in seven East Asian economies. Our results are consistent with two complementary explanations. First, concentrated ownership and the associated pyramidal and cross-holding structures create agency conflicts between controlling owners and outside investors. Consequently, controlling owners are perceived to report accounting information for self-interested purposes, causing the reported earnings to lose credibility to outside investors. Second, concentrated ownership is associated with low earnings informativeness as ownership concentration prevents leakage of proprietary information about the firms' rent-seeking activities, which are prevalent and profitable in East Asia.

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Year of publication:	2001-10
Authors:	Fan, Joseph P.H. ; Wong, T.J.
Institutions:	Center for Economic Institutions, Institute of Economic Research
Subject:	Ownership concentration \| Transparency \| Earnings informativeness \| Emerging markets

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Extent:	application/pdf
Series:	CEI Working Paper Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	This version: October 2001, This paper was presented at the conference on Designing Financial Systems in East Asia and Japan: Toward a Twenty-First Century Paradigm. This two-day conference was co-organized by the International Monetary Fund and the CEI. It was held during September 24-25, 2001 at Hitotsubashi Memorial Hall in Tokyo, Japan. A select group of academics, researchers and policy makers from around the world gathered to examine the timely issue of how the financial systems and corporate governance in East Asia and Japan should be redesigned in order to achieve sustainable economic development. The conference included six sessions with 17 papers. All the presented papers were added to the CEI series of working papers. The series, as well as the contents of the conference, can be reached at http://cei.ier.hit-u.ac.jp. Number 2001-21 43 pages long
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; M41 - Accounting
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005045191