Earnings Quality And Information Asymmetry

In 2004,the China Securities Regulatory Commission implemented regulations to safeguard the interests of retail investors by proposing an increase in the participation of public shareholders during company shareholders’ meetings.Listed companies were encouraged to provide online voting platforms.The popularity of online voting has since grown.The purpose of this paper is to explore the role of retail investors in corporate governance and how it can achieve its intended objective of protection.By analyzing annual observation data from listed companies on the Shenzhen Stock Exchange class A share main board between 2011 to 2017,we will investigate the efficacy of online voting for shareholder meetings in safeguarding the interests of retail investors,with respect to the relationship between corporate earnings quality and information asymmetry.This paper examines the implementation of online voting in shareholders’ meetings as the research topic.Based on the analysis of relevant literature from both domestic and foreign sources,the annual observation values of companies listed on the Shenzhen Stock Exchange’s Class A share main board from 2011 to 2017 are chosen as samples.With these samples,the paper empirically investigates the relationship between online voting,information asymmetry and corporate earnings management.The empirical results show that there is a negative correlation between the accrued earnings and the degree of information asymmetry.After incorporating the interaction variable between the implementation of online voting and the quality of earnings,additional research on moderation effects revealed that online voting can alleviate the exacerbation of information asymmetry caused by a company’s earnings quality.This indicates that the involvement of retail investors in corporate governance has somewhat reduced the information asymmetry between informed and uninformed traders.This correlation is particularly evident in firms that are privately owned,have inadequate internal controls,receive low media coverage,and exhibit average or inadequate information disclosure standards.The key contributions of this article are as follows: firstly,it offers a unique perspective by examining the correlation between corporate earnings management behavior and retail investor participation in corporate governance.Previous research focuses on the research of institutional investors,company executives and other market participants on corporate earnings.This article explores the impact of management behavior from the perspective of protecting retail investors.Secondly,for the first time,the online voting used in shareholders’ meetings has demonstrated that even retail investors possess the ability to discern the quality of corporate earnings,thereby effectively reducing the degree of information asymmetry in the market.In summary,this study confirms the protective impact of online voting implementation for retail investors and offers empirical support for the enforcement of protection policies for retail investors.