An Empirical Study On The Relationship Between Family Control And The Quality Of Information Disclosure

Berle and Means's classical research in 1932 has fixed the image of the modern corporations as one run by professional managers unaccountable to shareholders. It's supposed that the ownership of capital is dispersed among small shareholders. One of the typical characteristic of widely held corporations is the separation of ownership from control, which gives rise to agency conflicts between managers and outside shareholders. However, La Porta et al. (1999). presented a different picture of the ownership structure. They found most corporations, even large firms, tend to have controlling shareholders, particularly at countries with poor shareholder protection. Sometimes the shareholder is state; but more often it is a family. As a result of this research, the agency problems between controlling shareholders and minority shareholders attract the attentions. Based on a sample of companies listed at Shenzhen Stock Exchange from 2005 to 2007, this paper explores the influences of the characteristics of the control right on the quality of information disclosure by doing research on the proportion of ownership, the proportion of control right, the road to acquire the control right, the way to achieve the control right and the multiple shareholders who limit the control right.The main results are summarized as follows:(1) The proportion of ownership is positively related to the quality of information disclosure, and the cash flow rights have the incentive effect on the controlling shareholders;(2) The relationship between the proportion of ownership and the information disclosure of family firms is showed as a shape of reverse U. When the control right is very low, the quality of information disclosure will become better as the control right goes higher. But when the control right has come to a certain degree, the quality of information reveal will become worse as the control right goes higher.(3) When family acquires their control right through indirect methods, they tend to disclose less information;(4) How family owners achieve their control rights will not influence the quality of information disclosure. But when the proportion of control right is higher than 30%, the separation of the ownership and control right will negatively influence the quality of information disclosure;(5) The internal restrictive function does not work well in family firms, but the external multiple shareholders can play a clear role of restriction.The innovations of this research are as follows:(1) Choose the family listed companies as the sample and do a relative detailed research on different perspectives of the control right;(2) Since now, the research on the control right of the family firms is more focused on the relationship with the company value. This research explored the quality of information disclosure of different types of family listed companies from the perspective of control right.This paper is expected to make some contributions to the study on the ultimate control right and agency problem in the corporation governance by taking the Chinese family firms as the sample. On the other hand, this research which investigated the quality of information disclosure from the perspective of control rights is a supplement for the research of information disclosure.