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Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia

Posted: 4 Dec 2002  

Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy

T.J. Wong

The Chinese University of Hong Kong (CUHK) - School of Accountancy

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Abstract

This study examines the relations between earnings informativeness, measured by the earnings-return relation, and the ownership structure of 977 companies in seven East Asian economies. Our results are consistent with two complementary explanations. First, concentrated ownership and the associated pyramidal and cross-holding structures create agency conflicts between controlling owners and outside investors. Consequently, controlling owners are perceived to report accounting information for self-interested purposes, causing the reported earnings to lose credibility to outside investors. Second, concentrated ownership is associated with low earnings informativeness as ownership concentration prevents leakage of proprietary information about the firms' rent-seeking activities, which are prevalent and profitable in East Asia.

Keywords: ownership concentration, transparency, earnings informativeness, emerging market

JEL Classification: G32, G34, M41

Suggested Citation

Fan, Joseph P. H. and Wong, T.J., Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia. Journal of Accounting and Economics, Vol. 33, No. 3, pp. 401-425, August 2002. Available at SSRN: https://ssrn.com/abstract=331961

Po Hung Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
(852) 26097839 (Phone)
(852) 26035114 (Fax)

Tak Jun Wong (Contact Author)

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
852.2609.7750 (Phone)

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