A Study On The Relationship Between Ownership Concentration,Investor Protection And Disclosure Quality:Microscopic Evidence

In Market Economic System, as the basis of the price, information determines the efficiency of resources allocation in the capital market. In a sense, the stock market can be seen as an information market. However, the rapid development of China’s stock maeket has been accompanied by disclosure violations, accounting manipulation and information distortion. Therefore, how to improve the quality of disclosure of listed companies to protect the minority investors has become the focus of attention in the theoretic and practical field.In this sduty, we are going to discuss the interaction mechanisms between ownership concentration, investor protection and disclosure quality. Firstly, starting with the motivation of disclosure, we analysis the relationship between ownership concentration, investor protection and disclosure quality. Then, we take example of a theoretical model of LLSV to deduce how the ownership concentration and investor protection affect the disclosure quality. Furthermore, we have constructed a micro-level investor protection index to describe the listed companies’investor protection level. In this theoretical framework, a cross-sectional data is used in the mulitiple regression analysis for the listed companies from SME in 2010 and we get the following revelatory conclusions:First, ownership concentration’s impact on disclosure quality depends on the investor protection level. The ownership of the largest shareholder has a significant positive effect on disclosure quality for companies with poor investor protection. However, the contrary is the case for the companies with strong investor protection. Equity balance has a negative impact on disclosure quality for companies with better investor protection. But the impact is not significant for the poor investor protection ones. Second, the level of investor protection has a significant positive effect on the quality of disclosure. Third, the presence of major shareholder can be used as an alternative mechanism for investor protection to compensate the negative effect on the quality of disclosure that is brought by weak investor protection. Finally, we put forward some policy suggestions on how to improve the quality of disclosure based on our research conclusions.