Corporate Governance in China: Research and Evaluation

CHAPTER 7

Research on Evaluation and Index of Information Disclosure

Information disclosure is defined as a system of law, for which the purpose is to defend the legal benefits of stakeholders, under which the corporation should disclose the information about the business achievements, financial situation and governance system completely, truthfully and in a timely way, in terms of the relevant regulations. Hence, the information users can judge the value of the company with this information. Information is characterized by externality, monopoly supply and asymmetry. Information users must refer to the accounting rules and information disclosure institution to attain the necessary information. According to the contract theory, the impetus of the information disclosure is from two main aspects; one is from the subscription, execution and supervision of the contract itself, and the other is from the effect of the market mechanism. The impetus from the contract will drive the corporation to provide all the information relative to the contract complement. If the signatories are numerous, the contract will probably be in vain because of the high cost.

As one section of the external regulation instrument, information disclosure can: provide evidence to the establishment of the corporate governance policy for government and securities regulatory authorities; help to enhance the efficiency of the resource allocation; reduce transaction costs; rebound to establish the ex post facto solution ...