Corporate voluntary disclosure and the separation of cash flow rights from control rights.
We find that corporate voluntary disclosure is negatively associated with the separation of cash flow rights from control rights. This result is consistent with the notion that as the separation of cash flow rights from control rights increases, controlling owners have larger incentives to exprop...
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| Format: | Research Report |
| Language: | English |
| Published: |
2008
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| Online Access: | http://hdl.handle.net/10356/14563 |
| Summary: | We find that corporate voluntary disclosure is negatively associated with the separation
of cash flow rights from control rights. This result is consistent with the notion that as the
separation of cash flow rights from control rights increases, controlling owners have
larger incentives to expropriate the wealth of minority shareholders and low corporate
disclosure constitutes a mechanism to facilitate controlling owners in masking their
private benefits of control. The negative association between voluntary disclosure and the
separation of cash flow rights from control rights is less pronounced for firms with
greater external financing needs. This result suggests that for firms with high separation
of cash flow rights from control rights, those with greater external financing needs
undertake higher firm-level voluntary disclosure to reduce information asymmetry. We
also find that the negative association between voluntary disclosure and the separation of
cash flow rights from control rights is less pronounced for firms that have a large nonmanagement
shareholder. Our result supports the role of large non-management
shareholder in mitigating agency problems associated with the separation of ownership
and control. |
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