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Information Disclosure Ranking, Industry Production Market Competition, and Mispricing: An Empirical Analysis

Author

Listed:
  • Bing Wang

    (School of Accounting, Fujian Jiangxia University, Fuzhou 350108, China)

  • Si Xu

    (School of Economics & Management, South China Normal University, Guangzhou 510006, China)

  • Kung-Cheng Ho

    (School of Finance, Collaborative Innovation Center of Industrial Upgrading and Regional Finance (Hubei), Zhongnan University of Economics and Law, Wuhan 430073, China)

  • I-Ming Jiang

    (Faculty of Digital Finance, College of Management, Yuan Ze University, Taoyuan 32003, Taiwan)

  • Hung-Yi Huang

    (Department of Business Administration, Soochow University, Taipei 10048, Taiwan)

Abstract

Improving the transparency of corporate information disclosure is a key principle of corporate governance in Taiwan. This study uses the information disclosure assessment system established by the information disclosure and transparency ranking system to explore whether information transparency can reduce the degree of mispricing. The study uses the data of 10,686 listed companies in Taiwan for the period from 2005 to 2014. We find that a higher information disclosure ranking (IDR) of rated companies corresponds to a more substantial reduction in the degree of mispricing. Moreover, we discover that product market competition affects mispricing in that smaller degrees of mispricing reflect greater exclusivity; this suggests that lower industry transaction and competition costs lead to less substantial mispricing. Finally, we observe that the effect of information disclosure score on the degree of mispricing is lower in more exclusive industries. Furthermore, a regression process using instrumental variables reveals that IDRs have the significant effect of reducing the degree of mispricing.

Suggested Citation

  • Bing Wang & Si Xu & Kung-Cheng Ho & I-Ming Jiang & Hung-Yi Huang, 2019. "Information Disclosure Ranking, Industry Production Market Competition, and Mispricing: An Empirical Analysis," Sustainability, MDPI, vol. 11(1), pages 1-16, January.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:1:p:262-:d:195493
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    2. Li-Su Huang, 2022. "Directors and officers liability insurance and default risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(2), pages 375-408, April.
    3. Jaehong Lee & Eunjoo Cho & Jong Sung Park, 2019. "Towards a More Transparent Disclosure for Corporate Sustainability: Focusing on the Regulation of Unfaithful Disclosure Designation," Sustainability, MDPI, vol. 11(22), pages 1-26, November.

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