A study of voluntary disclosure of listed Chinese firms - a stakeholder perspective

Purpose – The aim of this paper is to investigate stakeholder power changes and their impact on firms' disclosure decisions in the Chinese stock market. Using legitimacy theory and stakeholder theory, the paper identifies newly emerged stakeholder groups for listed Chinese firms during three distinguished periods of the development of the Chinese stock market.

Design/methodology/approach – Panel data analysis was undertaken over a period from 1995-2006 with an aim to examine the influence of stakeholder power changes on voluntary disclosures made by 297 listed firms in their 12 years of annual reports. A voluntary disclosure checklist has been used for hand-collecting data from annual reports.

Findings – The finding shows that different stakeholder groups exert different degrees of influence on firms' decision-making in respect of information disclosure during different stages of the development of the Chinese stock market.

Research limitations/implications – The impact of a stakeholder power changes on corporate disclosure has not been well addressed and how listed Chinese firms respond to these changes is still a significant gap in the Chinese corporate disclosure literature. In this study, the paper uses proxies to represent each stakeholder group, discuss power changes of each group and predict the impact of power changes on firms' voluntary disclosure.

Originality/value – The paper identifies the new content of the “social contract” between listed firms and Chinese society and identifies various stakeholder groups of listed Chinese firms in the context of a new “social contract”. The paper predicts that voluntary corporate disclosure is the result of stakeholder pressures and firms use voluntary disclosure as one of their strategies to manage the firm-stakeholder relationship.

Costs and benefits of mandatory auditing of for-profit private and not-for-profit companies in Australia

This paper addresses the paucity of research surrounding the mandatory auditing of for-profit private and not-for-profit companies in Australia. We document the various mandatory auditing provisions under the Corporations Act and identify over 22 000 companies that lodge audited accounts with the regulator under federal law. In 2011, 6339 large proprietary companies, 186 small proprietary companies, 2797 foreign-owned companies, 3985 unlisted public companies and 8404 public companies limited by guarantee had an obligation under the Corporations Act to lodge audited accounts. While large proprietary and foreign-owned companies have an option to apply to the Australian Securities and Investment Commission for audit relief, we estimate that less than 10% are granted audit exemption. We document that since 1995 an additional 1500 large proprietary companies that should have lodged under the size provisions of the Corporations Act have been granted exemption from doing so (i.e., grandfathered), although these firms appear to be subject to an annual audit even though they do not lodge accounts. We estimate the costs and discuss the potential public interest and firm-level benefits associated with the mandatory auditing of for-profit private and not-for-profit companies in Australia.

Workplace human rights reporting: a study of Australian garment and retail companies

The opening of the Australian economy in a globalised world has led to Australian garment and retail corporations moving their manufacturing overseas and acquiring goods from overseas providers. This is usually better for the corporations’ bottom-line, as they can purchase goods overseas at a fraction of their local cost, partly due to cheap labour. Australia is one of the many OECD countries not to have a well regulated environment for workplace human rights. This study examines 18 major Australian retail and garment manufacturing corporations and finds that workplace human rights reporting is poor, based on content analysis of their annual reports, corporate social responsibility reports and websites. This is probably due to the failure of the Australian Government to provide adequate oversight by promulgating mandatory reporting standards for both local and overseas operations of Australian companies. This permits corporations to avoid reporting their workplace human rights standards and breaches.

Investor heterogeneity and the cross-sectional stock returns in China

We examine the relationship between divergence of opinion and the cross-sectional stock returns in Chinese A share market where short-selling of stocks is prohibited by law. Using a proxy for divergence of opinion among the entire investor base, we document a positive relationship between divergent beliefs and future stock returns. This is in sharp contrast to Miller's (1977) prediction of a negative relationship between the two. The result is likely to be driven by the dominance of individual investors and their speculative trading behaviors in China. Miller's prediction is confirmed when divergence of opinion is measured using data on mutual fund holdings. Our results are robust to a number of common return predictors. We also find a significantly negative relationship between the fraction of tradable shares in listed Chinese companies and future stock returns. Increase in the fraction of tradable shares tends to reduce the predictability of stock returns using divergence of opinion.

Why do companies not produce sustainability reports?

Sustainability reporting emerged on the corporate scene nearly 30 years ago as a key mechanism through which business organisations would manage a transition to a new business landscape dominated by greater concern and consciousness about sustainability. While it has become something of a feature on the corporate agenda in some parts of the world, the majority of business organisations do not undertake this type of reporting. This paper explores why 23 of Australia's top 200 companies do not undertake sustainability reporting. The study is situated in the context of a considerable literature that promised numerous benefits to be derived from this type of reporting. The paper uncovers various social and organisational factors that raise some new questions about legitimacy theory, corporate accountability and the spread and uptake of this organisational practice.

What do indigenous communities think of the CSR practices of mining companies?

This paper examines how one indigenous community in the Western Province of Papua New Guinea (PNG) views the social responsibility initiatives of OK Tedi Mining Ltd (OTML). This mining operation has been controversial since its inception, and various operators of the mine have sought to engage the community and to undertake a number of CSR-related projects. Insights gained from four focus groups amongst the Ok Tedi River indigenous communities show that while some members of the community are satisfied with the company’s efforts at the macro level, many have reservations about the effectiveness of the programs at the micro level on the village and family unit. The implementation of CSR activities are slow and in many instances do not effectively address stakeholder concerns.

Response rates in Australian market research

RICA commissioned Deakin University to “establish whether response rates are in decline in the Australian market research industry and to identify, as far as possible, the reasons for these declines if they exist. This is likely to involve a review of previous research, a literature review and collection of data on response rates provided on a confidential basis and with the assistance of AMSRO to facilitate data provision.”

Attempts were made to contact all listed market research companies in Australia, including all major internet panel companies. While industry co-operation was not high with the study, sufficient data was provided to depict current response rates and to show how they had declined over time. Because of the low contactability issues, this Report proposes the use of better methods to compute the reliability of survey estimates by taking account of past survey results.

The literature review revealed a wealth of recent studies, with the main emphasis being on studies of telephone and internet surveys. This review of the research produced 34 evidence-based guidelines for social researchers. While some of these reflect current practice, the emergence of the internet as the main survey method raises a number of disclosure and sampling issues. Esomar (2012) has produced 28 issues to be raised with providers, which sets the basis for good industry practice. This suggests an opportunity for the industry to adopt these standards as its own and to conduct training courses for major clients and suppliers. There are many panel providers, some of whom are not AMSRO members. AMSRO may need to examine what role it can play in mandating or encouraging adherence to these standards as a way of promoting the industry.

Talks with key industry people, as well as the literature, have revealed the importance of blended surveys, where multiple contact and response mechanisms are used. Particularly where an internet panel is used as one source, this poses representativeness and weighting issues which are difficult to resolve. The Report recommends that where blended survey methods are used, measures be taken to measure contactability in the other contact media, along with more sophisticated weighting schemes. The industry should examine its training courses to ensure that industry expertise keeps pace with these developments.
Summary of Results

The results focus on two main collection methods – the telephone and the internet. As far as the telephone is concerned response rates have been in a gradual decline the last decade. This outcome is hard to detect because the data show considerable fluctuations from one survey wave to the next. Among cold-calling surveys, telephone response rates are typically below 10%, for a range of topics and survey types. Co-operation rates, (the ratio of obtained interviews to refusals) are typically below 0.2 (that is below one interview to five refusals). Telephone interviews with clients have a higher response rate – typically above 20% with co-operation rates above 1.0. It would appear that some topics, such as financial services, may induce a lower level of co-operation. Government sponsored surveys have higher response rates, at times over 50%, but even here a sharp decline in response rates over time for one long running monitor was observed. Co-operation rates were also higher in government sponsored surveys.

One long data series from a telephone omnibus suggested that the “Do Not Call Register” which began in May, 2007 had some positive effects for the industry. Initially there was a spike in both response rates and co-operation. Although this was relatively short-lived, response rates thereafter declined more slowly and co-operation rates were somewhat higher and remained stable. These conclusions should be regarded as tentative as more data series would really be necessary to see if similar trends occurred elsewhere.

As far as the internet is concerned, panel response rates are around the 20% mark and appear to be relatively stable over the last few years. In this case, the gross response rate is the number of interviews divided by the number of invitations sent. As the number of invitations may be a function of the need to fill a survey quickly, it should be considered a gross indicator of response. In order to capture this phenomenon, a further measure has been devised, termed the “attempt rate” which measures the percentage of people who attempt to participate once sent the invitation. The available data suggests that it is relatively stable. However, it is also somewhat susceptible to the time the survey was left open. Finally, a co-operation rate was also calculated. It measures the ratio of completed to terminated interviews, typically at least five interviews to each termination, but often much higher. This measure is not directly comparable with the co-operation rate in telephone surveys because it cannot take account of the number of eligible people on the panel who open the invitation, see the company doing the survey or its length and decide not to take the survey. For internet client studies, response rates were typically somewhat higher than shown for the panels, but there was marked variability.

There was only one study provided of intercept interviews. It showed response rates of over 60% and co-operation rates of nearly 2 interviews per refusal. A strength and a weakness of intercept interviewing is the ability to be selective in who is asked to participate. As for mail, one government sponsored mail survey from 2010 is reported, with a response rate over 50%. The previous review contains more data, as mail appears to be infrequently used within the industry for commercial surveys.

While surveys remain a major and highly effective tool for the industry and its clients, issues with contactability and co-operation mean that even closer attention is needed to survey design, sampling, weighting and analysis than was previously the case.

Real and substantial connections : Enforcing Canadian privacy laws against American social networking companies

Any organisation that captures personal data in Canada for processing is deemed tohave a ‘real and substantial connection’ to Canada and thus fall within thejurisdiction of the Personal Information Protection and Electronic Documents Act(PIPEDA) and of the Office of the Privacy Commissioner of Canada (OPC). Whathas been the experience of enforcing Canadian privacy protection law on US-basedsocial networking services? We analyse some of the high-profile enforcement actionsby the Privacy Commissioner. We also test compliance through an analysis of theprivacy policies of the top 23 SNSs operating in Canada and through the use of accessto personal information requests. Our analysis suggests that non-compliance iswidespread, and is explained by the countervailing conceptions of jurisdictioninherent in corporate policy and technical system design.

Fraud, market reaction, and the role of institutional investors in Chinese listed firms

The extent and type of financial fraud committed by listed firms in China, stock market reaction to the detection and announcement of fraud, and the association between institutional ownership and financial fraud are the subjects of this article. Using fraud data from the period between 2001 and 2011, the authors find wide occurrences of fraud and a strong negative market reaction on the announcement date, particularly in cases of serious fraud. Fraud is more likely to occur at firms that have a smaller proportion of independent directors and at poorly performing firms. Firms with higher mutual fund ownership subsequently have fewer incidences of fraud. Our results reports by the authors indicate that ownership by independent institutions, such as mutual funds, serves as an effective monitoring mechanism, deterring fraud and enhancing corporate governance in Chinese capital markets.

Detecting Fraud: The Role of the Anonymous Reporting Channel

The purpose of this paper is to examine whether anonymous reporting channels (ARCs) are effective in detecting fraud against companies. Fraud, which comprises predominantly asset misappropriation, represents a key operational risk and a major cost to organisations (ACFE, http://www.acfe.com/uploadedFiles/ACFE_Website/Content/rttn/2012-report-to-nations.pdf, 2012; KPMG, http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/Fraud-Survey/Documents/fraud-bribery-corruption-survey-2012v2.pdf, 2012). The fraud triangle (incentives, opportunities and attitudes) provides a framework for developing our understanding of how ARCs can increase detection of fraud. Using publicly listed company survey data collected by KPMG in Australia—where ARCs are not mandated—we find a positive association between ARCs and reported fraud. These results indicate that ARCs are effective in detecting fraud. Additional analysis reveals that small firms derive the greatest benefit from adopting ARCs. We also find that independent boards do not directly influence the detection of fraud, but companies with independent boards detect more fraud because they implement ARCs.