Institutional ownership and information transparency: Role of technology intensities and industries

Information disclosure is a necessary activity in corporate governance; information transparency plays a unique role in corporate governance in the era of knowledge-based economy. Lack of transparency can lead to confusion, misinformation, and distrust. With this in mind, we examine the factors that influence corporate information transparency in terms of two dimensions: technology intensity and institutional ownership. Drawing on data from a 2005–2012 cross-section sample of 1391 public firms evaluated by the official ‘information disclosure and transparency ranking system’ (IDTRS), we find that increases in domestic institutional ownership for firms in high-tech industries, relative to foreign institutional ownership, lead to a current-year upgrade in information transparency, but not for firms in other industries. We also find that firms with increased foreign institutional ownership and high-tech firms with both increased governmental institutional or corporate ownership and high R&D intensity can sustain a longer-run upgrade in corporate transparency. Pushing further we also investigate whether corporate transparency in high-tech industries is negatively affected if governmental institutional or corporate shareholders are involved in corporate governance, but cannot find strong evidence for such a tendency. Our results suggest that institutional shareholders promote good corporate governance practices which gradually improve at the pace of high technology development.