The University of Southampton
University of Southampton Institutional Repository

Does mutual fund ownership affect financial reporting quality for Chinese listed privately-owned enterprises?

Does mutual fund ownership affect financial reporting quality for Chinese listed privately-owned enterprises?
Does mutual fund ownership affect financial reporting quality for Chinese listed privately-owned enterprises?
This paper examines the role of mutual funds in enhancing financial reporting quality in China.Mutual funds are more sophisticated and influential than individual investors. Therefore, they are expected to be more effective at preventing executives from expropriating investors and manipulating earnings as a cover-up, which in turn would reduce the incidence of modified audit opinions (MAOs). Our results, based on the Chinese listed firms from 2003 to 2008, confirm this prediction. More importantly, the effects of mutual fund ownership in reducingthe incidence of MAOs are greater among privately owned enterprises (POEs), and especially those with higher growth. This is because POEs rely more heavily on the capital market for financing than do state-owned enterprises (SOEs), and because growth opportunities need to be funded by additional external capital. The finding implies thatmutual funds form an important part of the external governance mechanismin emerging countries, but this effect is moderated by state control and ownership.
1057-5219
Chan, Ann Ling-Ching
1e5f1be0-75fc-45d9-bd5f-b084215099bd
Ding, Rong
ca23647f-00f4-42d4-a308-6570c8e370b5
Hou, Wenxuan
eb0d410d-b603-47bf-ab14-e8d26389b007
Chan, Ann Ling-Ching
1e5f1be0-75fc-45d9-bd5f-b084215099bd
Ding, Rong
ca23647f-00f4-42d4-a308-6570c8e370b5
Hou, Wenxuan
eb0d410d-b603-47bf-ab14-e8d26389b007

Chan, Ann Ling-Ching, Ding, Rong and Hou, Wenxuan (2014) Does mutual fund ownership affect financial reporting quality for Chinese listed privately-owned enterprises? International Review of Financial Analysis. (doi:10.1016/j.irfa.2014.02.004).

Record type: Article

Abstract

This paper examines the role of mutual funds in enhancing financial reporting quality in China.Mutual funds are more sophisticated and influential than individual investors. Therefore, they are expected to be more effective at preventing executives from expropriating investors and manipulating earnings as a cover-up, which in turn would reduce the incidence of modified audit opinions (MAOs). Our results, based on the Chinese listed firms from 2003 to 2008, confirm this prediction. More importantly, the effects of mutual fund ownership in reducingthe incidence of MAOs are greater among privately owned enterprises (POEs), and especially those with higher growth. This is because POEs rely more heavily on the capital market for financing than do state-owned enterprises (SOEs), and because growth opportunities need to be funded by additional external capital. The finding implies thatmutual funds form an important part of the external governance mechanismin emerging countries, but this effect is moderated by state control and ownership.

Full text not available from this repository.

More information

Accepted/In Press date: March 2014
Organisations: Centre of Excellence in Decision, Analytics & Risk Research

Identifiers

Local EPrints ID: 364937
URI: https://eprints.soton.ac.uk/id/eprint/364937
ISSN: 1057-5219
PURE UUID: a1e6fb8b-2728-4e0a-9642-60791bffbf40

Catalogue record

Date deposited: 19 May 2014 09:58
Last modified: 18 Jul 2017 02:26

Export record

Altmetrics

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of https://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×