Economic consequences of increased accounting disclosure: Evidence from an emerging market (China).

摘要

This dissertation investigates the economic consequences of increased accounting disclosure due to the implementation of new accounting and auditing standards in an emerging order-driven market (China). Because the adoption of these standards can increase both the quantity and quality of accounting disclosure and reduce information asymmetry, it is proposed that the Chinese companies would subsequently experience a significant reduction in the adverse selection component of bid-ask spread and hence the size of bid-ask spread.; To achieve the objective, I conduct the following analyses. First, I estimate the components of bid-ask spreads and find that the adverse selection component accounts for about 37 percent of the total spread. This indicates that the information asymmetry cost is a substantial component of the bid-ask spread in the emerging market.; Second, I perform a cross-sectional study to investigate what factors influencing bid-ask spread and whether the companies experienced reductions in bid-ask spread, as well as changes in trading volume and price volatility. I show that bid-ask spread decreased subsequent to the adoption of the standards (except for the second batch of accounting standards), indicating that the companies experienced reductions in the information asymmetry risk. Consistent with the literature on information precision and diversity of traders' beliefs, the results on trading volume and price volatility are mixed. I also find significant relationships between bid-ask spread, trading volume, price volatility, firm size, and stakeholders' ownership.; Third, my time-series intervention analysis shows that the declines in the bid-ask spreads are permanent. Moreover, the reduction in bid-ask spread is relevant to the changes in firm size and stakeholders' ownership. However, the time-series results are limited regarding the first and second batches of accounting standards. Possible explanations could be (1) these disclosure requirements might not affect all companies; (2) some companies voluntarily disclosed information prior to the adoption; (3) these disclosures might motivate traders to seek for private information; (4) investors might not be sophisticated enough to digest the cash flow information or might have already had equivalent information. This requires further study, in the future, on the companies' disclosure behavior and traders' trading behavior in the emerging market.