Voluntary Disclosure Bringing about Information "Lemon" or "Transparent?": From Information Reliability Perspective

This paper investigates the relationship of voluntary disclosure and information quality. A broad sample of 4551 listed Chinese firms is choused excluding financial industries from 2005 to 2008. Considering endogenous problem, we use OLS model and a model of simultaneous equations (2SLS method) to explore the relationship, respectively. Our results indicate that there is a typical endogenous problem between voluntary disclosure and information quality; the higher the reliability of company information, the higher level of voluntary disclosure of information, thus, voluntary disclosure level reflects information quality to a certain, and provides investors with a simple tool for identifying listed company information quality; however, the level of voluntary disclosure has negative effects on information quality, as shows that some companies with higher reliability information may make use of the trust of their investors. Further, we find that, the level of voluntary disclosure has far less influence on information quality than the opposite impact according to coefficient. Therefore, voluntary disclosure makes China's capital market more transparent, as a whole. But, It is not neglected the compact of voluntary disclosure on information quality, yet.