Research On The Determinants Of Accounting Transparency Based On Ultimate Controlling Rights

PricewaterhouseCoopers released a report about “the opacity index” in January2001, China’s “accounting opaque” index is86, second only to South Africa（90）. Itreflects the diaphaneity to a certain extent compared with other countries, the accountingtransparency of listed companies is lower in our country. Especially the outbreak ofglobal financial crisis in2008, both at home and abroad will raise the accountingtransparency to improve the financial market environment. Therefore, both the theoryand practice circles focus on the accounting transparency of listed companies. Then,what are the determinants of accounting transparency? What causes the differencesbetween the accounting transparencies of listed companies? What measures should betaken by the supervision departments and listed companies to improve the accountingtransparency? These are the points this article mainly focuses on.At present，most of the domestic research on the influential factors of accountingtransparency bases on the viewpoint of controlling shareholder, i.e., the first majorshareholders, rarely through that of the common shareholders to the ultimateshareholders. These conclusions are of certain one-sidedness. According to the ultimatecontrol rights transmission mechanism, the ultimate shareholders are the actualcontrollers of listed company’s financial policy. The ultimate shareholders often controllisted company through constructing the Pyramid structure, cross shareholdings, floatingmultiple stocks and so on. In addition, the ultimate shareholders can also strongly controlthe listed company by directly or indirectly dispatching representatives to the board ofdirectors or management. Therefore, from the perspective of ultimate control rights, it isof great theoretical and practical value on effectively inhibiting the interestembezzlement which the ultimate shareholders fasten on small investors and promotingthe healthy development of the capital market.The combination of theoretical and empirical analysis research method is mainlyused. In the theoretical part, analize measurable methods on accounting transparency, thechoice of methods, the characteristics of ultimate controlling rights, its restricted factors,and put forward related research hypotheses. In the empirical part, some kinds ofstatistical and econometrics technique, such as descriptive statistical analysis, the meandifferences significant packet inspection, related analysis, nonparametric statistical test and Logistic regression analysis and so on are adopted to test empirically the effect of theultimate controlling right’s characteristics and its restricted factor on the listed companyin China. In addition, search for the main determinants of the accounting transparencybased on the ultimate controlling rights by using the principal component analysismethod.The thesis consists of eight chapters:The first chapter is introduction. The main content is to introduce the whole thesisbriefly, including the research background, research value, research methods, researchtrain of thought and the research innovations, as well as the structure and organization ofthe thesis.The second chapter is the literature review. Firstly, discuss the representativedocuments about the influence factors of accounting transparency based on directcontrolling right’s characteristics, ultimate controlling right’s characteristics and itsconstraints. Secondly, systematically analyze the measurable methods on the accountingtransparency. Thirdly, comment on the related document. Finally, point out thesedocuments’ deficiencies and research direction.The third chapter is theoretical analysis about the relationship between the ultimatecontrolling right’s characteristics and the accounting transparency. Using the theoreticalanalysis such as principal-agent theory, contract theory and property rights theory.At first,from the perspective of ultimate controlling rights, elaborate the research reason for theaccounting transparency. Secondly, systematically analyze the way of the ultimateownership’s characteristics affecting accounting transparency. Thirdly, comment theeffect of ultimate controlling structure on the accounting transparency. Finally, discussthe relation between the part-time’s ultimate shareholders and the accountingtransparency. Then put forward research hypothesis needed to confirm on the basis ofthese analyses.The fourth chapter is empirical analysis about the relationship between the ultimateownership’s characteristics and accounting transparency. In this chapter, the empiricalstudy is used. The mean difference significance test, correlation analysis and Logisticregression analysis and so on are adopted to test the relation among the ultimateshareholder’s cash flow rights, controlling rights, separation of two rights, the ultimateshareholder’s controlling level，the nature of the ultimate shareholder，the ultimate shareholder’s over-control on the Board and management and the accountingtransparency. Studies have shown that: with the improvement of the ultimate shareholdercash flow rights, accounting transparency also significantly improved; with the increaseof the ultimate shareholders’ controlling rights, the accounting transparency shows thefeature of the inverted "U", rising first and then declining, but not significantly.Compared with the non-state-controlled listed companies, separation degree of thestate-controlled listed companies’ controlling rights and cash flow rights on negativeimpact of accounting transparency is relatively small. The controlling of the ultimateshareholder on the board can significantly reduce the accounting transparency.State-owned listed companies have significantly improved the accounting transparency.The accounting transparency was not affected by the ultimate shareholders’ control onmanagement and level.The fifth chapter is theoretical analysis about the effect of the constraints to theultimate controlling rights on the accounting transparency. Using the theoretical analysissuch as principal-agent theory, game analysis and reputation theory.In this section,comment the relationship among independent directors, audit committee, board ofsupervisors, other large shareholders, institutional investors, external audit andaccounting transparency, and then propose the hypotheses to be tested.The sixth chapter is empirical analysis about the relationship between ultimatecontrolling rights and accounting transparency. On the basis of chapter5，test the aboveconstraints on the impact of accounting transparency. The results show that theindependence of the audit committee, the proportion of institutional investors holding,audit opinion and audit fees and accounting transparency are significantly positivelycorrelated, showing that accounting transparency is improved by the independence of theaudit committee, institutional investors ownership, audit opinion and audit costs.Whether listed companies establish an audit committee or not is not of a significantdifference on accounting transparency, the independent directors and the role of theboard of supervisors have not been effectively played, the role of the other majorshareholder is very limited, and accounting firm size has not significant effect onaccounting transparency.The seventh chapter is empirical analysis about the determinants of accountingtransparency. Put the ultimate controlling rights’ characteristics and its constraints into a unified analytical framework, using principal component analysis to extract and identifythe main ingredients, and using the accounting transparency as the dependent variable,and principal components as explanatory variable, establish two models to analyze thedominant determinants of the accounting transparency. The basic conclusion of thischapter is consistent with that of chapter4and6.The eightth chapter is the conclusions and suggestions. In this part, summarize andelaborate the main conclusions, and then put forward some suggestions to listedcompanies in China, supervise authorities and other parties. At last, point out the futureresearch area.The innovations are mainly embodied in the following aspects:(1)From the traditional direct control, trace back to the effect about ultimatecontrolling rights on the accounting transparency. While extending the dimension ofanalysis, previous studies are mostly limited to the cash flow rights, control rights and theseparation of two rights, and how the the controlling of ultimate shareholders on theboard and management affect the accounting transparency are not considered. Theanalysis angle is more complete and scientific by making the controlling of ultimateshareholders on the board and management into a unified analytical framework.(2)Put the ultimate controlling rights’ characteristics and its constraints into a unifiedanalytical framework, using principal component analysis to extract and identify themain ingredients, and using the accounting transparency as the dependent variable, andprincipal components as explanatory variable, establish two models to analyze thedominant determinants of the accounting transparency. Make up for the previous scholarsto ignore integration research on the ultimate control characteristics and restricted factors,which makes the conclusions more persuasive and certain academic value.(3)Increase the ultimate shareholders’ controlling rights’ square in the model in orderto verify the existence of a U-shaped relationship or inverted U-shaped relationship inorder to compensate for the lack for previous conclusions. The results show that therelationship between ultimate shareholders’ controlling right and accounting transparencyis the inverted U-shaped feature.