This study examines whether the earnings response coefficient
(ERC) is conditional on the transparency of corporate governance (CG) in
emerging markets. Using 81 of the top 100 Chinese firms that are listed either
in mainland China or in Hong Kong, we find that the level of governance
transparency positively interacts with ERC. This finding is generally robust to
controls for various firm specifications (size, assets growth, leverage, E/P ratio)
and institutional factors (listing place, issuing status, and economic sector). The
predicted model is tenable even if we change earnings metrics and window
settings. Our refined analysis using five subcategories governance scores
indicates that the interaction of governance transparency on ERC is mostly
contributed by information disclosure on shareholders and related parties, two
types of governance information that concern investors. The alternative test
using governance structural variables further shows that the relation of ERC is
not significantly conditional on the CG structure.