Voluntary corporate governance disclosure, firm valuation and dividend payout: evidence from Hong Kong listed firms

HG Finance;HF5601 Accounting

Ronnie Lo, Hok-Leung ; Danbolt, Jo

University:University of Glasgow

Department:Adam Smith Business School

关键词: corporate governance, voluntary disclosure, firm valuation, dividend payout, Hong Kong listed firms;   

Others  :  http://theses.gla.ac.uk/1357/1/2009ronninelophd.pdf

来源: University of Glasgow

【 摘 要 】

The disclosure of Corporate Governance (CG) information by firms has been found in prior studies to have an impact on the market value of firms.This thesis extends the research by studying the impact of voluntary CG disclosure by firms in Hong Kong, a market which provides a strong legal investor protection but characterized by a high insider ownership, on company valuation, as proxied by Tobin’s q.This thesis also examines the role of dividend payout on the CG of Hong Kong firms.Based on hand-collected data for a sample of 258 firm-years over the 2003-2005 period, the empirical results show that, firstly, voluntary CG disclosure is positively and significantly related to market valuation for small firms, but the relationship is not significant for large or medium firms.Combining large firms and small firms in a pooled sample, as done in most previous studies, thus misses the differential value relevance of voluntary CG disclosure for small versus large firms.Secondly, firms with higher CG disclosure are associated with lower dividend payout ratios, ceteris paribus. The evidence appears to suggest that CG disclosure can substitute for dividend payout. Thirdly, those small firms with medium levels of insider ownership are found to pay lower dividends than small firms with either low or very high levels of insider ownership, suggesting that investors would expect higher dividends from small firms that are prone to, or have either agency problems or entrenchment problems. Furthermore, controlling for the level of insider ownership, a small firm with high CG disclosure is always associated with a higher market valuation.The empirical evidence suggests that voluntary CG disclosure has a much stronger impact on the reduction of information asymmetry between investors (i.e., the outsiders) and managers (i.e., the insiders) for small firms than for large firms.Hence, by voluntarily disclosing more CG information, a small firm can be expected to enjoy the double benefits of receiving a higher market valuation and a lower demand for dividend payout from investors. This study contributes to the research of value relevance of CG disclosure in several ways.It provides clear evidence that voluntary CG disclosure enhances the valuation of small firms, which previous research may have overlooked.It also shows that voluntary CG disclosure and the level of insider ownership jointly affect a firm’s valuation and dividend payout.Voluntary disclosure of corporate governance information, even under a strong legal regime for investor protection, seems to be a company attribute very much appreciated by outside investors.