Do Chinese companies that produce Annual Reports in both English and Chinese manipulate the English versions, somewhat, to present themselves in more favorable lights? Yes, some of them, sometimes do.
Tina Lang (et al.) from the California State University at East Bay drilled through 262 company reports in both in Chinese and English from 2005~2017 and found there were patterns to the differences.
- The differences were smaller for stocks with an H-share Hong Kong quote.
- The differences were greater for smaller companies
- Greater differences occurred with companies that had either large government subsidies and/or high levels of debt
The third point is believed to be a result of those types of companies desire to downplay the fact, to the English speaking and therefore foreign audience, they may be in receipt of more government patronage than they’d like widely advertised.
Of particular interest to analysts should be the observation that one of the most frequent areas of discrepancy of description was Directors biography’s which frequently omitted details in English versions.
Most analyst-practitioners have been aware of these differences for some time and even without a full analysis of Chinese versions of reports there are some basic practices that can help help avoid serial hoodwinking.
Good at last though to see some academic rigor applied to a problem that won’t go away, no matter how smart machine translation becomes.
You can access the work in full via the following link Language Barriers.
Happy Sunday.