ENVIRONMENTAL DISCLOSURE, EARNINGS RESPONSE COEFFICIENT, AND DOMINANT OWNER IN MANUFACTURING COMPANY IN INDONESIA

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International Journal of Civil Engineering and Technology (IJCIET)
Volume 10, Issue 05, May 2019, pp. 362-372, Article ID: IJCIET_10_05_038
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJCIET&VType=10&IType=5
ISSN Print: 0976-6308 and ISSN Online: 0976-6316
© IAEME Publication
ENVIRONMENTAL DISCLOSURE, EARNINGS
RESPONSE COEFFICIENT, AND DOMINANT
OWNER IN MANUFACTURING COMPANY IN
INDONESIA
Citra Amalia Alim
Faculty of Economic and Business, Universitas Airlangga, Indonesia
Amalia Rizki*
Faculty of Economic and Business, Universitas Airlangga, Indonesia
*Corresponding Author
ABSTRACT
This study investigates the effect of environmental disclosure toward earnings
response coefficient and the effect of dominant owner’s voting-cash flow rights wedge
toward relation of environmental disclosure and earnings response coefficient in
manufacturing company in Indonesia. This study is crucial because investors needs
has changed from profit oriented only to Triple-P Bottom Line which is Profit, Planet,
and People. This condition makes some companies improve environmental disclosure
as their sustainability reports. They did this for attracting investors to invest in their
company. This is quantitative study using multiple linear regression. By using
purposive sampling, we collected 161 annual reports of 115 manufacturing companies
which are listed in Indonesia Stock Exchange as data. The result show that
environmental disclosure positively affects earnings response coefficient. However,
dominant owner's voting-cash flow wedge has negative impact toward the relation of
environmental disclosure and earnings response coefficient. Therefore, this results
offer evidence of the importance of environmental disclosure in sustainability reports
of manufacturing company. However, the stakeholder of the company should think
about dominant owner's voting-cash flow wedge because it can affect inverstors’s
trust. Contribution of this study is an effort of the company to report environmental
disclosure carefully in order to attract the invertors.
Key words: Environmental Disclosure; Earnings Response Coefficient;
Manufacturing company
Cite this Article: Citra Amalia Alim and Amalia Rizki, Environmental Disclosure,
Earnings Response Coefficient, and Dominant Owner in Manufacturing Company in
Indonesia, International Journal of Civil Engineering and Technology 10(5), 2019, pp.
362-372.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=10&IType=5

Citra Amalia Alim and Amalia Rizki
1. INTRODUCTION
Negative impact of globalization to any sector (1) especially economics sector, for example a
nasty politics (2), has opened up opportunities for foreign companies to enter the domestic
local market (Indonesia). This situation makes the competition between companies in
Indonesia get tighter so this force companies to improve their performance, for example
increasing company’s working capital. That working capital can comes from Sales Revenue,
Equity Capital, Debt Capital and Sales of Assets (3).
In capital investment, Investors invest and hope will get high return. Then, investors
speculate various aspects to assess which companies are having a good performance so they
have high return. But, there are changing of view of investor’s interest and want, from profit
oriented only become Triple-P Bottom Line oriented which is profit, planet, and people
(4).This condition makes some company improve Environmental Disclosure, either Annual
Reports or Sustainability Reports.Sustainability Reports is a report published by the company
voluntarily (voluntary disclosure).Sustainability Reports contains corporate responsibility
reports in environmental, social, economic, labor aspects, better known as Environmental
Disclosure.
In relation of company financial, there is a complementary correlation between company
financial and sustainability report. Companies with high financial information have incentives
to disclose all types of information(5). Companies with a high commitment to social
responsibility provide more extensive and transparent reports. This affects quality of company
financial reports. Quality of that company financial reports is better than company which have
low commitment (6). Other than that, company with high commitment to business ethics
shows a good quality of financial reports(Choi & Pae, 2011).
Furthermore, high commitment for Corporate Social Responsibility decrease level of
income smoothing(8). Company with high commitment to social responsibility have a small
possibility of earnings management and manipulating the real operational activity of
company(9). Other than that, most company with high social responsibility have a good
quality of financial reports(10). Therefore, there is a correlation between ERC and
Environmental Disclosure.
In company, there is voting rights for dominant stockholder and cash flow right for
minority stockholder known as Dominant Owner’s Voting-Cash Flow Rights Wedge.
Dominant stockholder will more adopt decisions that maximize economic, social, and
company environmental behavior value which affect to decisions for revealing social and
environmental responsibility than minority stockholder. This shows the relation between
Environmental Disclosure to quality of earnings which is represented by ERC along with the
increasing Dominant Owner's Voting-Cash Flow Wedge.
Several previous studies related to the effects of Environmental Disclosure in companies
had been taken by some experts. Bona-Sánchez, Pérez-Alemán, & Santana-Martin (2017)
analyzed about sustainability reports, ERC and dominant owner’s Voting-Cash Flow Wedge
in companies listed in Spanish stock Exchange. The resulr of their study was sustainability
reports gave positive effects towards ERC. Besides, Ma (2012) also analyzed voluntary
disclosure and market reaction in U.S. public firm. The study showed that voluntary
disclosure gave positive effect towards stock market reaction. In addition, Meici and Adiati
also anlyzed the effect of enviromental disclosure towards stock return in compenies listed in
Indonesia stock Exxchanges during 2009-2013. The study showed an evidence that
environmental disclosure influence stck return.
However, an analisys of environtmental disclosure and earning respons coefficient and its
relatiton towards dominant owner’s Voting-Cash Flow Wedge in manufacturing company

Environmental Disclosure, Earnings Response Coefficient, and Dominant Owner in
Manufacturing Company in Indonesia
listed in Indonesia Stock Exchange during periode 2010-2015 is rarely conducted. Therefore
this study investigates the relation between environmental disclosure, earning respons
coefficient, and Dominant Owner’s Voting-Cash Flow Wedge. Its crucial to be conducted in
order to know the effect of environmental disclosure and Dominant Owner’s Voting-Cash
Flow Wedge in manufacturing companies. Thus, this study intend to know the effect of
environmental disclosure toward earning response coefficient and to know the effect of
dominant owner’s Voting-Cash Flow Wedge toward the relation of Environmental Disclosure
and Earning Response Coefficient in manufacturing companies which are listed in Indonesia
Stock Exchange. We supposed that Environment Disclosure affects ERC and Dominant
Owner’s Voting-Cash Flow Wedge affects the relation Environmental Disclosure and ERC.
1.1. Stakeholder Theory
Stakeholders are people or groups that can influence or be influenced by the achievement of
organizational goals (13). Stakeholders are not only stockholders but also include customers,
suppliers, creditors, employees and the general public. Therefore, profit maximization for
shareholders can no longer be the sole purpose of the company. Some other objectives that
need to be considered by managers include demands and needs relating to social and
environmental behavior where these two aspects are directly related to society. Stakeholder
theory also explained that shareholder needs could not be met without satisfying the needs of
other stakeholders, other than shareholders and managers (13). To satisfy stakeholders in
order to continue to support the company's operations, the companies need to disclose
information needed by stakeholders. Based on stakeholder theory, disclosure of social and
environmental responsibility is needed as a form of transparency and company’s
responsibility towards parties who have interests, so that it can build good relations between
the company and stakeholders. Good relationship between the company and stakeholders
shows that there is stakeholder support for the company's path that can be strength to achieve
sustainable business goals.
1.2. Information Asymmetry
Information Asymmetry is a condition where there is an imbalance in the receipt of
information that occurs between two or more parties. In general, in large companies,
information asymmetry is one of the problems that arise in agency conflicts where these
problems arise if the manager has access information on the company's prospects exceeding
that of the owner of the company (14). Information asymmetry can not only occur between
agents and principals, but also can occur between management and principals with parties
outside the company concerned (15). This condition can occur when agents and principals
manage to overcome conflicts between them so they have the same interests. If this happens,
there will be cooperation between agents and principals in terms of establishing company
policies that support the interests of insiders, even though the policy can harm other
stakeholders outside the company.
1.3. Environmental Disclosure
Environmental Disclosure is a disclosure made by the company in handling the operational
activities of the company whose impacts relate to the environment around the company. This
is a form of social responsibility and commitment to company performance towards
stakeholders. The environmental dimension in sustainability reports is the impact of
organizational activities on surrounding ecosystems, both living things and inanimate objects
such as soil, air and water. Measurements for environmental indicators include matters
relating to inputs (material, energy, water) and output (emissions, waste, waste).

Environmental accountability is also the attitude of the company in responding to the
information needs of groups that have interests related to environmental and social conditions,
such as trade unions, environmental activists, religious circles and other groups (16).
1.4. Earnings Response Coefficient
Earnings Response Coefficient is a projection of the quality of company profits, by looking at
the market response to company profits. Earnings Response Coefficient measures the level of
abnormal market returns of a security in response to an unexpected component of reported
earnings from the company issuing the securities (15). The quality of earnings can be
indicated as the ability of earnings information to respond to the market. The strong market
reaction to earnings information, reflected in the high earnings response coefficients (ERC),
shows quality reported earnings.
1.5. Dominant Owner’s Voting-Cash Flow Rights Wedge
The controlling shareholder is an individual, family, or institution that has control of a
company either directly or indirectly at the cut-off of certain control rights (17). The
controlling stockholder is also called the dominant stockholder. The dominant stockholder has
voting rights, where voting rights are the right to determine the company's financial and
operational policies, the greater the percentage of dominant stockholder ownership, the
greater the voting rights held by dominant shareholders (18). Stockholders other than the
dominant stockholders with a smaller percentage of ownership are called minority
stockholders. Minority stockholders only have cash flow rights, namely the rights of the
stockholders' financial claims to the company in accordance with the percentage of ownership
held by the minority stockholders. So, the greater the difference or deviation of voting rights
and cash flow rights shows that the level of control of dominant stockholders is higher than
the minority stockholders. Deviations or differences in voting rights with cash flow rights in
the company can indicate the existence of inequality or imbalance of information received
between stockholders within the company.
1.6. Environmental Disclosure and ERC
According to previous studies, social and environmental disclosure has an interest in the
quality of financial reports. Companies with high social and evironmental responsibility have
a good quality of financial reports. Therefore, a company with a high environmental
disclosure has good ERC. Some researchers argued that social and environmental disclosure
could improve the quality of company reports. However, several other researchers stated that
social and environmental disclosure could bring down the company’s reporting quality. It was
because it could improve the possibily of data manipulation in order to improve the image of
the company. Based on the explanation above, we proposed the first hypothesis as follows:
Hypothesis 1: Environment Disclosure affects ERC
1.7. Dominant Owner’s Voting-Cash Flow Wedge, Environmental Disclosure and
ERC
The dominant stockholder has greater control rights than the cash-flow rights, while minority
stockholders generally only have cash-flow rights. This can lead to increase the differences of
interest between the internal parties of the company (managers and dominant stockholders)
and the minority stockholders. It is because minority stockholders are at risk of taking
possesion by internal parties of the companies (19). The dominant stockholders would be
more likely to adopt decisions that maximize the economic, social and behavioral values of
the company's environment than other stockholders. This has an impact on the decision to

disclose social and environmental disclosure that are expected to develop long-term
relationships with other stakeholders. This is done as a way to improve the company's image,
secure business sustainability and the company's success.
According to explanation above, there is a positive effect of Environmental disclosure on
earnings quality that is represented by ERC along with the increasing Dominant Owner's
Voting-Cash Flow Wedge. This shows that the higher the dominant stockholder control
rights, the higher the possibility of decision making that maximizes economic, social and
environmental behavior values. So, it is possible to increase the extension of Environmental
disclosures which can affect the earnings quality of corporate reporting (ERC). Based on the
description above we propose the second hypothesis as follows:
Hypothesis 2: Dominant Owner’s Voting-Cash Flow Wedge affects the relation
Environmental Disclosure and ERC
Dependent variable Independent variable
H1
H2
Moderate Variable
Figure 1 Theoretical model
H1: 0,013
H2: 0,49
Figure 2 Model for the relation of Dominant Owner’s Voting-Cash Flow Wedge, environmental
disclosure,and ERC
Environmental
Disclosure
ERC
Dominant Owner’s
Voting-Cash Flow
Wedge
Environmental
Disclosure
ERC
Dominant Owner’s
Voting-Cash Flow
Wedge

2. MATERIAL AND METHOD
2.1. Method and Variables
This study was quantitative using multiple linear regression. We used SPSS 15.0 for
calculating multiple linier regression. This study employed three variables. Those were
dependent variable, independent variable, and moderating variable. Earnings Response
Coefficient (ERC) as a dependent variable was measured by Cumulative Abnormal Return
(CAR) regression with Unexpected Earnings (UE). While independent variable was
Environmental Disclosure (ED). It was measured by GRI G3 index, and moderating variable
was Dominant Owner’s Voting-Cash Flow Wedge (DOI).
2.2. Sample of the Study
The data in this study were publication of financial statements or annual reports of
manufacturing companies listed on the Indonesia Stock Exchange during the period 2011
2015. The data were collected from the IDX web. The data were selected using purposive
sampling technique in order to get the appropriate data for this this study. There were several
criterias for the samples of this study. Those were mmanufacturing companies should be
registered at IDX during the period 2011-2015, the company issued Annual Reports and
Financial Reports during the period 2011 – 2015, the company used Rupiah as a currency to
explain the company's financial condition in the Annual Report or company financial
statements, and the company was not only owned by one dominant shareholder and the
community.There were 115 manufacturing companies which was listed in Indonesia Stock
Exchange during the period 2011-2015. But there were only several companies which were
appropriate as the data of this study in each year. There were 35 samples in 2011, 27 samples
in 2012, 32 samples in 2013, 35 samples in 2014, and 32 samples in 2015. Therefore, there
were 161 data sample of publication of financial statements or annual reports of
manufacturing companies in this study.
2.3. Data Analysis
The assessment and calculation of variables in this study used the formula from several
experts. Environmental Disclosure assessment using the GRI G3 Guidelines standard in this
study refered to the research conducted by Clarkson et al (2008).
EDi = ................................................................ (1)
𝑬𝑫𝒊 : Environmental Disclosure company i
Σdi : amount of dimension by company i
ΣdGRI : amount of dimension by company i based on GRI G3 Guidelines
Besides, ERC calculations used an annual period with backward management process of
three years earlier. ERC calculations by CAR regression with UE refered to the research
conducted by Bona-Sanchez (2017).
ERCit = CARit = α + β UEit + ε ................................................ (2)
𝑬𝑹𝑪𝑖𝑡 = Earnings Response Coefficient perusahaan i ; in t period
𝑪𝑨𝑹𝒊𝒕 = Cummulative Abnormal Return perusahaan i ; in t period
UEit = Unexpected Return perusahaan i ; in t period
.............................................................. (3)
𝑼𝑬𝑖t : Unexpected Earnings perusahaan i
𝑬𝑷𝑺it : Earning per share perusahaan i ; in t period

EPSit-1: Earning per share perusahaan i ; in t-1 period
CARit = Rit - Rmt .................................................... (5)
𝑖𝑡 𝑡
.............................................................................................. (6)
𝑪𝑨𝑹𝒊𝒕 : Cummulative Abnormal Return perusahaan i ; in t period
𝑹𝑖𝑡 : Return perusahaan i ; in t period
𝑷𝒊𝒕 : Harga saham perusahaan i ; in t period
𝑷𝒊 𝒕−𝟏 : Harga saham perusahaan i ; in t-1 period
𝑹 𝑡 : Return market indeks ; in t period
𝑰𝑯𝑺𝑮𝒊𝒕 : IHSG pada periode t
IHSGit-1 : IHSG in t-1 period
While Dominant Owner’s Voting-Cash Flow Wedge assessment refered to La Porta
(1999) with Control Chain method. Then, variables were tested by classical assumption test to
determine whether regression model was feasible or not for this study. Classical assumption
test included normality test, multi co linearity test, heteroscedasticity test, and autocorrelation
test.
Furthermore, the variables were tested by multiple linear regression and Moderated
Regression Analysis (MRA) for multiple regression where regression equation contains
interaction element (multiplying two or more variables). This test were started with t-test and
determined the significance level which is denoted as α= 5%. H0 was accepted and H1 was
rejected if number of significance level of t-test was more than 5%. It meant that independent
variables did not have relation to dependent variables. H0 was rejected and H1 was accepted
if the number of significance level of t-test was less than 5%. It meant that independent
variables had relation to dependent variables. Then, coefficient of determination (R2
) was
used to determine how the dependent variable can be explained by the independent variable.
If number of R2
was closer to 1, then relation of independent variables to dependent variables
is stronger.
3. RESULTS AND DISCUSSION
3.1. Descriptive Analysis
The informativeness in company financial report which is represented by Earnings Response
Coefficient (ERC) shows how the market response to changes in reported earnings, where
these result shows the quality of company financial report. Market respond shows a positive
number which is mean that financial report disclosed can affect the decision making of
investors. The results of descriptive statistical shows the lowest number of ERC is -1.1627,
the highest number of ERC is 0.9928 and the mean is 0.038364. The greater number of ERC,
the higher quality and informativeness of the financial report disclosed by the company.
The calculation of Environmental Disclosure (ED) which is a variable that shows the
disclosure by a company related to corporate environmental responsibility which was
measured by GRI G3 index as Environmental Disclosure standard shows the mean is
0,055280 with the lowest number is 0,0000. The highest number is 0,3667. Companies that
have an ED value of 0 in 2011 amounted to 37 companies from 52 companies. While in 2012
there were 19 companies from 51 companies. In 2013 there were 14 companies from 54
companies. Whereas in 2014 there were 10 companies from 52 companies and in 2015 there
were 9 companies from 51 companies. The calculation shows that from 2011 to 2015 there
was a decrease in the number of companies that did not disclose environmental responsibility

in accordance with the GRI G3 Guidelines. More companies are disclosing Environmental
Disclosure in published annual reports.
In addition, calculation of the Dominant Owner's Voting-Cash Flow Wedge (DOI) shows
that the lowest number for this DOI variable is 0.2185, while the highest number is 800.7500
and the mean is 41.319722. The high number of this variable shows the ownership imbalance
within the company which can increase the likelihood of information asymmetry due to the
gap in the percentage of ownership. Information asymmetry is also one of the factors that can
reduce the quality of financial reports and informativeness of company.
3.2. Hypothesis Testing
As mentioned in the literature review, this study suggests two hypotheses. Those two
hypotheses are accepted. To gain a better understanding, the testing is visualized Figure 2.
The proof of the hypothesis is to look at the value of the t-test which aims to determine the
relation of the independent variable on the dependent variable partially. Based on the
summary results of multiple linear regression in Table 1. Positive regression coefficients
indicate unidirectional changes between the independent variables on the dependent variable,
while the negative coefficients indicate opposite direction changes between the independent
variables on the dependent variable. Results of the hypothesis testing of the multiple linear
regression model are, Based on Table 1, the results of the regression model analysis show the
number of the t-test on the ED variable is 2.016 with a significance level of 0.045 (P <0.05),
so that H0 is rejected and H1 is accepted. It can be concluded that ED has a significant
positive relation on ERC.
The coefficient of determination (R2) shows how much the entire independent variable
explains the dependent variable. In Table 1, the results of statistical calculations in multiple
linear regression (model 1) show R2 or the coefficient of determination of 0.025, meaning
that ED is able to explain ERC by 2.5%, while the remaining 97.5% is relation to other
variables which is not included in the study. Table 1 also shows the number of the F test of
4.065 with a significance level of 0.045 (P <0.05) (see table 1). The meaning is that there are
simultaneous relation of all independent variables in the regression model 1 ED on the
dependent variable ERC. The results of regression analysis model 2 shows the number of the
t-test of ED variable is 2.519 with a significance level of 0.013 (P <0.05) (see tabel 1). It
means that H0 is rejected and H1 is accepted. It can be concluded that ED has a significant
positive relation on ERC.
Table 1 Results of Model 1 and 2 Statistic Analysis
Variable Model 1 Model 2
B T Sig B T Sig
Constants - 0,13 -0,321 0,749 -0,023 -0,563 0,574
ED 0,925 2,016 0,045* 1,176 2,519 0,013 *
DOI 0,000 1,717 0,088
ED_DOI -0,020 -1,981 0,049 *
R 0,158 0.239
R2 0,025 0.057
F test 4,065 3.174
Sig 0,045* 0.026*
Notes: *sig (p<0,05)
However, for the Dominant Owner's DOI variable, the number of the t-test is 1.717 with a
significance level of 0.088 (P> 0.05). It can be concluded that the size of the board of
directors has no significant relation on ERC. Meanwhile, the number of the t-test on the

relation between the ED variable and the DOI is -1,981 with a significance level of 0.049 (P
<0.05). So that, H1 is accepted and H0 is rejected. That is, DOI moderates the relation of ED
on ERC negatively. In other words, the DOI weakens the positive relation of ED on the ERC.
The coefficient of determination (R2) shows how much independent variables explain the
dependent variable. In Table 1, the results of statistical calculations in moderation regression
(model 2) obtained R2 or coefficient of determination of 0.057. This means that ED, DOI and
the relation between ED independent variables and DOI moderation variables are able to
explain the variation of ERC by 5.7%, while the remaining 94.3% is relation to other
variables that is not included in this study. The F test number based on Table 1 is 3.174 with a
significance level of 0.026 (P <0.05) meaning that there are simultaneous relation between all
the independent variables in regression model 2 (ED, DOI and ED * DOI) on the dependent
variable (ERC).
3.3. Effect of Environmental Disclosure (ED) toward Earnings Response
Coefficient (ERC)
T-test number on the analysis of the regression model 1 of ED variable is 2.016 with a
significance level of 0.045 (P <0.05) (see tabel 1). It means that H0 is rejected and H1 is
accepted. Thus ED has a significant positive relation on ERC. Positive regression coefficients
indicate that the higher the ED affects the market response to changes in Earnings Response
Coefficient (ERC). Thus, the first hypothesis is accepted. There is a positive relation between
the extent of ED to ERC. The higher ERC means the higher market response to changes in
company profits, indirectly indicating that the information provided by the company can be
trusted by investors.
This shows that market participants see and respond to whatever information the company
discloses about its environment (21). In other words, the market sees and evaluates the long-
term benefits of what the company discloses regarding the corporate environmental
responsibility. These assessments can affect the decisions of market participants in responding
to changes in corporate profits. In the Annual Reports, most companies reported only
expressing "goodness" from their business practices. This is for ensuring the sustainability of
the company's business and their contribution in maximizing stockholder value (22).
Furthermore, it was found that there was a decrease in the number of companies that did
not conduct environmental disclosures in accordance with the GRI G3 standard. This can
prove that many companies have begun to seriously carry out their environmental
responsibilities according to international standards and publish them in the form of
Environmental Disclosure. This condition is caused by changes in the views of investors who
not only focus on profit oriented but also planets and people oriented (4). So that companies
begin to show their environmental and social responsibility in order to maintain good
cooperative relationships with investors and attract the interest of other investors.
3.4. Effect of DOI toward the relation of ED and ERC
Based on t-test number on the interaction between the ED variable and the DOI is equal to -
1,981 with a significance level of 0.049 (P <0.05), Thus, H1 is accepted and H0 is rejected.
DOI moderates the relation of ED on ERC negatively or DOI weakens the positive relation of
ED on ERC. High gap or level of difference between the ownership of dominant stockholders
and minority stockholders causes a weak relation between Environmental Disclosure and
Earnings Response Coefficient.
When the gap in ownership percentage of dominant stockholders and minority
stockholders gets higher, it will cause a gap in the receipt of information (11). This causes

information asymmetry. Minority stockholders are in an unfavorable position where decision
making is largely under the control of the dominant stockholder. This condition can open
opportunities for cooperation between insiders (dominant stockholders and internal parties) in
making decisions that might harm minority stockholders and other stakeholders. This causes
investor trust besides insider. They do not trust the information disclosed by the company. In
other words, the quality of company information is not good enough to be considered by
investors besides insiders in making decisions. Thus, the market response to changes in
earnings disclosed by the company tends to decrease in contrast to the increase in the
company's percentage stockholder gap. So that, the DOI weakens the positive relation of ED
to ERC.
4. CONCLUSION
Environmental Disclosure (ED) has a positive relation on Earnings Response Coefficient
(ERC). The higher ERC, the higher market response to changes in company profits. It means
that the investors began to consider the long-term benefits of environmental disclosure
disclosed by the company. This shows the company's responsibility for the environment.
These assessments can influence investors' decisions in response to changes in company
profits. However, Dominant Owner's Voting-Cash Flow Wedge has negative impact toward
the positive relation between Environmental Disclosure to Earnings Response Coefficient.
The large percentage of ownership inequality can causes an information asymmetry that
affects investor trust in the company. It means that the market response to changes in profits
revealed by the company tends to decrease. This is because of distrust of investors other than
insiders. This is caused by the possibility of cooperation between the dominant owner of the
company and internal parties in making decisions that could endanger minority stockholders
and other stakeholders.
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