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The split equity reform and corporate financial transparency in China

Wendy Green (School of Accounting, University of New South Wales, Sydney, Australia)
Richard D. Morris (School of Accounting, University of New South Wales, Sydney, Australia)
Haiping Tang (Pricewaterhousecoopers, Sydney, Australia)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 22 July 2010



The purpose of this paper is to report the impact of the Chinese capital market split equity (SE) reform in 2005 on the corporate financial transparency of Chinese listed companies.


Using an International Financial Reporting Standards‐based checklist, the paper investigates whether the post‐reform 2005 annual reports of reformed companies improved transparency compared to pre‐reform 2004 reports. The transparency of the reformed companies was also compared to a control group of companies unreformed on December 31, 2005.


Results indicate that the SE reform increased corporate disclosures. Reformed companies had higher mandatory and voluntary disclosures in their post‐reform 2005 annual reports compared to their pre‐reform 2004 annual reports. In addition, the improvement in mandatory and voluntary disclosures for reformed companies is greater than that of the unreformed control group.

Research limitations/implications

The SE reform provides a unique natural experimental setting in which to examine the impact of the SE reform, with its associated change in ownership structure and corporate governance, on corporate disclosure.

Practical implications

The results of this paper suggest that the SE reform has had a positive effect on corporate financial transparency in China, thereby indicating the positive response to regulation in this emerging market. Further, the results suggest that as the proportion of government ownership falls, management has increased incentive to voluntarily supply additional information to the market.


The SE reform is unique to China and this paper is the first to report on financial reporting disclosure implications of this reform.



Green, W., Morris, R.D. and Tang, H. (2010), "The split equity reform and corporate financial transparency in China", Accounting Research Journal, Vol. 23 No. 1, pp. 20-48.



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