Disclosure and minority expropriation: A study of French listed firms

In this paper we examine the influence of minority expropriation on disclosure level in France where shareholders are poorly protected and the main agency problem is the one between controlling and minority shareholders (type II conflict) while prior studies have been undertaken in the United States, in a context of ownership dispersion and high investor protection where the main agency conflict opposes managers to shareholders (type I conflict). Using a sample of 81 French firms on the 2001-2004 period, we find a negative relation between disclosure level and both ownership and control concentration and double voting rights shares. These results confirm that type II conflict exacerbates the disclosure problem. Controlling shareholders benefit from superior information which helps them to profit from private benefits at the expense of minority shareholders particularly when they hold voting rights in excess of their cash flow rights; therefore they are likely to reduce disclosure. Our results show also a positive relation between disclosure level and family control which is similar to Ali, Chen et Radhakrishnan (2007) findings on American firms.