The Research Of Relativity Of Intermediaries Reputation And The Quality Of Information Disclosure

With the rapid development of Chinese economy for nearly two decades and the strict listing requirements of the domestic capital market, more and more Chinese enterprises prefer listing abroad, especially the world’s largest and most mature U.S. capital markets. However, as Chinese concept share crisis mounted 5 years ago, a large chunk of Chinese enterprises confronted the doubts and got shorted since their information disclosure quality failed to meet the standard. The reasons are nothing more than, enterprises’ own problems, the discrepancy between the Chinese and American capital market and the intermediaries’ inaction. Less emphasis is currently on the research of the intermediary organization in China, although it acts a more important role for the listed companies due to the indispensable part in the process of IPO enterprises’ listing and the difference of laws and regulations abroad as well as market environment, etc. Reputation mechanism is widely taken as a measure of the role of the intermediary in academia, which plays a certain part of information authentication in the capital market, regulate and supervise the quality of IPO companies’ information disclosure. Therefore, viewed from the CCS in American, the correlation between the reputation of intermediary organizations and listed companies’ information disclosure quality will be studied so the Chinese companies that already got listed or plan to will be able to reveal higher quality information while keep long-term developing in U.S. capital markets.Representing the main underwriter’s reputation, the reputation of accounting firm and the Joint reputation of these two as the reputation of the intermediary organization, combining both normative and empirical research methods, this paper explores the influence of the reputation of intermediaries on the quality of the enterprise information disclosed.0/1 virtual variable is to measure the reputation here: top ten over all underwriters and the Big Four international accounting firms as the intermediaries with high reputation, while the rest as the ones with lower reputation; two transparency information indexes, the earnings aggressiveness and the earnings smoothing, as the substitution variables of the information disclosure quality. Through literature review and theoretical analysis, this paper presents the hypothesis of the relationship between reputations of the underwriter, accounting firms and their joint reputation, and the quality of corporate information disclosure. The sample data of Chinese enterprises listed on the NYSE and Nasdaq during 2005-2011 to be taken as the research subject, explanatory variables, the explained variables and the corresponding control variables to be set, the empirical model is finally constructed.As the information disclosure quality is with two substitution variables, the relationship between three types of institutions’ reputation and the earnings aggressiveness and the earnings smoothing is used for the regression analysis and test: first, the main underwriter’s reputation as the explanatory variable used to examine its relationship with the information disclosure quality; second, the accounting firms’ reputation as the explanatory variable to check; Finally, to test the impact of intermedary organizations’ joint reputation on the information disclosure quality. As the empirical results shown, the main underwriter’s reputation has a significant positive correlation with companies’ information disclosure quality, while accounting firms’ has only modest relationship. Besides, the joint reputation of intermediary organizations positively affects the quality. As found by studies, CCS generally chooses the Big Four as their audit firms, which leads to minor difference of the samples. Addition to the different levels of earnings management more or less in Chinese enterprises, it’s relatively restrictive for the Big Four to exert the independence. Nevertheless, accounting firms with high reputation still positively influence IPO companies’ information disclosure quality. When enterprises choose the main underwriter and accounting firms with high reputation, their information disclosure quality improves.The possible novelty of this paper lies on: domestic research mostly focuses on the sole study of the underwriter or the accounting firm’s reputation with less consideration to the connection of the intermediaries. What’s worse, related research rarely analyzes companies’ information disclosure quality from the perspective of the intermediary’s reputation. Through collecting by hand materials of underwriters and accounting firms hired by IPO companies, it studies the impact of the intermediary organization’s reputation on the company’s information disclosure quality. Will enrich the relevant literature and research system in China and have a guide on the development of CCS.