IDEAS home Printed from https://ideas.repec.org/a/eee/jocaae/v21y2025i2s1815566925000165.html

Supervision of not-for-profit minority institutional shareholder and annual report readability: Evidence from a quasi-natural experiment☆

Author

Listed:
  • Zhu, Liyi
  • Sun, Qian
  • Zhang, Wenyu
  • Sun, Jian
  • Zheng, Lidong

Abstract

In this study, we examine the efficacy of the China Securities Investor Services Center (CSISC), an advanced minority shareholder safeguard mechanism endorsed by the China Securities Regulatory Commission (CRSC), in promoting the quality of information disclosure. By utilizing a difference-in-differences analysis on the sample of Chinese listed companies, we find that CSISC shareholding improves the readability of annual reports. Additional analyses reveals that the impact of CSISC shareholding on the readability of annual reports is more pronounced with weaker internal and external governance supervision, poorer operational performance, stronger competitive intensity and senior management without a legal background. Our study contributes to the research related to the economic consequences of the CSISC exercise at the micro-enterprise level and the determinant of annual report readability. Furthermore, our findings hold significant implications for regulatory authorities aiming to enhance the investor protection system.

Suggested Citation

  • Zhu, Liyi & Sun, Qian & Zhang, Wenyu & Sun, Jian & Zheng, Lidong, 2025. "Supervision of not-for-profit minority institutional shareholder and annual report readability: Evidence from a quasi-natural experiment☆," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(2).
    • Handle: RePEc:eee:jocaae:v:21:y:2025:i:2:s1815566925000165
    DOI: 10.1016/j.jcae.2025.100469
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1815566925000165
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcae.2025.100469?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chen, Tao & Dong, Hui & Lin, Chen, 2020. "Institutional shareholders and corporate social responsibility," Journal of Financial Economics, Elsevier, vol. 135(2), pages 483-504.
    2. Hans B. Christensen & Luzi Hail & Christian Leuz, 2016. "Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement," The Review of Financial Studies, Society for Financial Studies, vol. 29(11), pages 2885-2924.
    3. Lo, Kin & Ramos, Felipe & Rogo, Rafael, 2017. "Earnings management and annual report readability," Journal of Accounting and Economics, Elsevier, vol. 63(1), pages 1-25.
    4. Hongkang Xu & Mai Dao & Jia Wu & Hua Sun, 2022. "Political corruption and annual report readability: evidence from the United States," Accounting and Business Research, Taylor & Francis Journals, vol. 52(2), pages 166-200, February.
    5. Juan Ma & Tarun Khanna, 2016. "Independent directors' dissent on boards: Evidence from listed companies in China," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1547-1557, August.
    6. Chen, Yangyang & Gul, Ferdinand A. & Truong, Cameron & Veeraraghavan, Madhu, 2016. "Auditor client specific knowledge and internal control weakness: Some evidence on the role of auditor tenure and geographic distance," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(2), pages 121-140.
    7. Tim Loughran & Bill Mcdonald, 2016. "Textual Analysis in Accounting and Finance: A Survey," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 54(4), pages 1187-1230, September.
    8. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    9. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    10. Ajina, Aymen & Laouiti, Mhamed & Msolli, Badreddine, 2016. "Guiding through the Fog: Does annual report readability reveal earnings management?," Research in International Business and Finance, Elsevier, vol. 38(C), pages 509-516.
    11. Robert H. Davidson & Aiyesha Dey & Abbie Smith, 2020. "Executives' Legal Records and the Deterrent Effect of Corporate Governance†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1444-1474, September.
    12. Peter M. Clarkson & Jennifer L. Kao & Gordon D. Richardson, 1994. "The Voluntary Inclusion of Forecasts in the MD&A Section of Annual Reports," Contemporary Accounting Research, John Wiley & Sons, vol. 11(1), pages 423-450, June.
    13. Gregory S. Miller & Douglas J. Skinner, 2015. "The Evolving Disclosure Landscape: How Changes in Technology, the Media, and Capital Markets Are Affecting Disclosure," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 53(2), pages 221-239, May.
    14. Emilie R. Feldman & Stuart C. Gilson & Belén Villalonga, 2014. "Do analysts add value when they most can? Evidence from corporate spin-offs," Strategic Management Journal, Wiley Blackwell, vol. 35(10), pages 1446-1463, October.
    15. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    16. Raufdeen Rameezdeen & Chamil Rajapakse, 2007. "Contract interpretation: the impact of readability," Construction Management and Economics, Taylor & Francis Journals, vol. 25(7), pages 729-737.
    17. Ge, Wenxia & Ouyang, Caiyue & Shi, Zhenyang & Chen, Zhanliao, 2022. "Can a not-for-profit minority institutional shareholder make a big difference in corporate governance? A quasi-natural experiment," Journal of Corporate Finance, Elsevier, vol. 72(C).
    18. Sun, Li & Johnson, Grace & Bradley, Wray, 2022. "CEO power and annual report reading difficulty," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(2).
    19. Qiu, Meng & Gu, Kai & Zhang, Zhichao & Zhang, Junrui, 2023. "Political uncertainty and financial statement readability," Research in International Business and Finance, Elsevier, vol. 66(C).
    20. Hinh Khieu & Nam H. Nguyen & Hieu V. Phan & Jon A. Fulkerson, 2023. "Political Corruption and Corporate Risk-Taking," Journal of Business Ethics, Springer, vol. 184(1), pages 93-113, April.
    21. K. Hung Chan & Donghui Wu, 2011. "Aggregate Quasi Rents and Auditor Independence: Evidence from Audit Firm Mergers in China," Contemporary Accounting Research, John Wiley & Sons, vol. 28(1), pages 175-213, March.
    22. Crane, Alan D. & Koch, Andrew & Michenaud, Sébastien, 2019. "Institutional investor cliques and governance," Journal of Financial Economics, Elsevier, vol. 133(1), pages 175-197.
    23. Kemin Wang & Xiaoyun Yu & Bohui Zhang, 2023. "Panda Games: Corporate Disclosure in the Eclipse of Search," Management Science, INFORMS, vol. 69(6), pages 3263-3284, June.
    24. Chang, Qingqing & Zhou, Yisihong & Liu, Guangqiang & Wang, Di & Zhang, Xiaojie, 2021. "How does government intervention affect the formation of zombie firms?," Economic Modelling, Elsevier, vol. 94(C), pages 768-779.
    25. Muhammad Nadeem, 2022. "Board Gender Diversity and Managerial Obfuscation: Evidence from the Readability of Narrative Disclosure in 10-K Reports," Journal of Business Ethics, Springer, vol. 179(1), pages 153-177, August.
    26. Xin Wang & Jiacai Xiong & Caiyue Ouyang & Feida Zhang, 2023. "I Feel Your Pain: The Effect of Regulator as a Minority Shareholder on Merger and Acquisition Performance," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 437-465, March.
    27. Hu, Yi & Jin, Shuchang & Gu, Qiankun & Tang, Ziling, 2022. "Can a not-for-profit minority institutional shareholder impede stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 47(PA).
    28. Jia, Jing & Li, Zhongtian, 2022. "Risk management committees and readability of risk management disclosure," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(3).
    29. Brian J. Bushee & Ian D. Gow & Daniel J. Taylor, 2018. "Linguistic Complexity in Firm Disclosures: Obfuscation or Information?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 56(1), pages 85-121, March.
    30. Rui Li & Jing Rao & Liangyong Wan, 2022. "The digital economy, enterprise digital transformation, and enterprise innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2875-2886, October.
    31. Yangyang Chen & C. S. Agnes Cheng & Shuo Li & Jingran Zhao, 2021. "The monitoring role of the media: Evidence from earnings management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 533-563, March.
    32. Chen, Shen & Chen, Yuran & Zhang, Di & Wang, Jinmei, 2023. "Can minority investor activism promote corporate risk-taking? Evidence from a quasi-natural experiment in China," International Review of Financial Analysis, Elsevier, vol. 85(C).
    33. Brian J. Bushee & John E. Core & Wayne Guay & Sophia J.W. Hamm, 2010. "The Role of the Business Press as an Information Intermediary," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 48(1), pages 1-19, March.
    34. Sarah E. Anderson & Mark T. Buntaine & Mengdi Liu & Bing Zhang, 2019. "Non‐Governmental Monitoring of Local Governments Increases Compliance with Central Mandates: A National‐Scale Field Experiment in China," American Journal of Political Science, John Wiley & Sons, vol. 63(3), pages 626-643, July.
    35. Luo, Jin-hui & Dong, Huaili & Liu, Yue, 2023. "Does high cash compensation compromise the independence of outside directors? Evidence from directors' dissenting votes in China," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    36. Li, Feng, 2008. "Annual report readability, current earnings, and earnings persistence," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 221-247, August.
    37. Chang, Yu-Tzu & Chen, Hanchung & Cheng, Rainbow K. & Chi, Wuchun, 2019. "The impact of internal audit attributes on the effectiveness of internal control over operations and compliance," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(1), pages 1-19.
    38. Renneboog, Luc & Szilagyi, Peter G., 2011. "The role of shareholder proposals in corporate governance," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 167-188, February.
    39. Paul C. Tetlock, 2010. "Does Public Financial News Resolve Asymmetric Information?," The Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3520-3557.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liao, Ke & Si, Yi & Zhu, Xinyu, 2025. "Exceed your duty: The substitution effect of minority investor governance on institutional site visits," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    2. Li, Xiaoxi & Zhong, Qinger & Liu, Shasha, 2025. "Random inspections and corporate information disclosure," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    3. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    4. Chen, Xin & Park, June Woo & Tsang, Albert & Xin, Yingying, 2025. "CEO left-handedness and readability," International Review of Financial Analysis, Elsevier, vol. 105(C).
    5. Chen, Yunsen & Feng, Zizhen & Yu, Yao & Yuan, Wei, 2025. "The capital market consequences of the regulator-led minority shareholder: Evidence from China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    6. Hossain, Amir & Bose, Sudipta & Shamsuddin, Abul, 2025. "Do integrated report readability and tone convey value relevant information? International evidence," Journal of Contemporary Accounting and Economics, Elsevier, vol. 21(3).
    7. Xiao, Zuoping & Zai, Jingjing & Su, Qiaoling, 2025. "Navigating through noise: Media's role in mitigating corruption's impact on bond markets in China," Research in International Business and Finance, Elsevier, vol. 79(C).
    8. de Souza, João Antônio Salvador & Rissatti, Jean Carlo & Rover, Suliani & Borba, José Alonso, 2019. "The linguistic complexities of narrative accounting disclosure on financial statements: An analysis based on readability characteristics," Research in International Business and Finance, Elsevier, vol. 48(C), pages 59-74.
    9. Hu, Yi & Jin, Shuchang & Xiong, Zhitao, 2025. "Regulator as a minority shareholder: How does public-plus-private enforcement affect investment-to-price sensitivity?," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1790-1815.
    10. Julien Maux & Nadia Smaili, 2024. "CEO narcissism, board of directors and disclosure quality: evidence from the readability of CEO letter," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(3), pages 341-358, September.
    11. Ahsan Habib & Mostafa Monzur Hasan, 2020. "Business strategies and annual report readability," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2513-2547, September.
    12. Ya-Guang Du & Shu Li & Nan-Ting Kuo & Dan Li, 2025. "Does the annual report readability improve corporate R&D investment? Evidence from China," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 22(2), pages 440-460, June.
    13. Cano-Rodríguez, Manuel & Moreno, Alonso, 2026. "Religion and the readability of textual financial disclosures," Research in International Business and Finance, Elsevier, vol. 81(C).
    14. Zhang, Xiang & Xu, Chongjie & Li, Hongzhan, 2025. "Minority shareholders protection and executive compensation contract effectiveness: Evidence from the establishment of the China Securities Investor Service Center," Economic Modelling, Elsevier, vol. 151(C).
    15. Li, Hong-Quan & Yang, Yang & Xue, Feng-Wan & Liu, Zhi-Yi, 2024. "Annual report readability and trade credit financing: Evidence from China," Research in International Business and Finance, Elsevier, vol. 69(C).
    16. Chen, Rongrong & Chen, Xiaomeng Charlene, 2025. "Regulatory influence on corporate cash holdings: Minority shareholder activism by regulators," International Review of Financial Analysis, Elsevier, vol. 102(C).
    17. Ren, Xiaoyi, 2025. "Non-profit minority institutional shareholder and corporate external guarantee," Journal of Multinational Financial Management, Elsevier, vol. 80(C).
    18. Qiu, Meng & Gu, Kai & Zhang, Zhichao & Zhang, Junrui, 2023. "Political uncertainty and financial statement readability," Research in International Business and Finance, Elsevier, vol. 66(C).
    19. Vismaya Gangadharan & Lakshmi Padmakumari, 2024. "Fogging the firm performance: an empirical examination of the annual report readability in India," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 211-226, June.
    20. Zhang, Zixi & Cheng, Xiaoke & Cheng, Hanxiu & Sun, Qian, 2024. "Supervision of not-for-profit minority institutional shareholder and the cost of equity: Evidence from a quasi-natural experiment," Finance Research Letters, Elsevier, vol. 63(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jocaae:v:21:y:2025:i:2:s1815566925000165. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-contemporary-accounting-and-economics .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.