Securities Times reporter Fan Luyuan

  After the annual report disclosure season of listed companies, more investors asked listed companies for the list of the top five customers.

  On the investor interaction platform of the Shenzhen and Shanghai Stock Exchange, more than 10 listed companies including Shagang, Sungrow, Jinghua Laser, and Front were asked by investors about their top five customers in the previous year or the last three years.

  For example, an investor asked an environmental company: "Which are the top five customers of your company?" The company replied: "Please refer to the company's annual report for the top five customers of the company, thank you!" In the annual report, the names of the top five customers are respectively referred to as "one, two, three, four and five", which means that there is no answer.

  Compared with the company's "playing word game" in its reply, more companies that did not disclose the names of the top five customers said bluntly in their reply: "The information of the top five customers involves the company's commercial secrets, and it is inconvenient to disclose it in detail."

  Under the trend of information disclosure as the core, the transparency of the information disclosure of important customers and suppliers by listed companies has been declining year by year.

  Using commercial secrets as a shield, most companies are very secretive about the disclosure of upstream and downstream information.

After the names of customers and suppliers are hidden, hidden related transactions, financial fraud and other behaviors are also more hidden, information asymmetry and the resulting risks increase, and the "three public" principle is eroded.

  "Top five" real-name disclosure rate

  has fallen to less than 10%

  Securities Times reporters have counted the top five customers and top five suppliers disclosed by listed companies in their annual reports since 2009.

The data shows that, on the one hand, the total number of listed companies is increasing;

  Taking the disclosure of the top five customers as an example, in 2009, the total number of A-share listed companies was 1,630, and the number of companies that disclosed the names of the top five customers in that year was 826, with a disclosure rate of 50.67%; The number of companies with the names of the top five customers is 1,043, with a disclosure rate of 52.89%; since then, the real-name disclosure rate of the top five customers has been declining. The number of companies is only 456, and the disclosure rate is as low as 9.74%.

  The real-name disclosure rate of the top five suppliers of listed companies has a similar trend, falling from a peak of 25.69% in 2012 to 10% in 2021.

  In addition, listed companies with different market capitalizations and industries also show significant differences in the disclosure rate of the "top five" names.

  In terms of market capitalization, the real-name disclosure rate of the top five customers has been decreasing all the way, regardless of the large, medium and small market capitalization companies (Figure 2).

In terms of market value, the disclosure rate of the top five customer names is inversely proportional to the company's market value.

In the past decade or so, the disclosure willingness of small-cap companies below 5 billion yuan has always been higher than that of large-cap companies.

In 2021, the disclosure rate of small-cap companies is 12.63%, while the disclosure rate of large-cap companies with a value of more than 20 billion yuan is only 5.01%.

Even in the most active years of disclosure, the disclosure rate of large-cap companies has never exceeded 40%, and the disclosure rate of small-cap companies once exceeded 60%.

  In terms of industries, in the 2021 annual report, the disclosure rate of the top five customers of traditional heavy industrial enterprises such as utilities, coal, petroleum and petrochemicals, and building decoration exceeds 20%; in contrast, electronics, light industry manufacturing, household appliances, etc. Competing industries have a disclosure rate of less than 5% (Table 1).

To a certain extent, this shows that factors such as the company's corporate attributes and the competitive intensity of the industry in which it operates have affected the willingness of listed companies to disclose.

  While fewer and fewer listed companies are disclosing the names of the "top five", the number of listed companies anonymously disclosed by code names such as 12345 and ABCDE has continued to increase, without disclosing complete information, and the names of customers and suppliers have become "cannot" the secret of speaking” (Figure 3).

As of 2021, more than 60% of listed companies have anonymously or partially disclosed their top five customers and top five suppliers.

  'Encouraged' disclosure context

  Why has the real-name disclosure rate been declining?

  A reporter from Securities Times reviewed the relevant policy documents for information disclosure of listed companies and found that the CSRC's disclosure requirements for the "top five" in the annual reports of listed companies are mainly reflected in the text of the annual report and the notes to the financial report.

In addition, the relevant disclosure requirements have been revised several times over the years (see Guidelines for the Content and Format of Information Disclosure by Companies Offering Securities to the Public No. 2 - Content and Format of Annual Reports, and Rules for Compilation and Reporting of Information Disclosure by Companies Offering Securities to the Public. No. 15 - General Provisions for Financial Reporting).

  In 2001, for the first time, the China Securities Regulatory Commission required listed companies to disclose the total sales volume and proportion of the top five customers, and the total procurement volume and proportion of the top five suppliers in the text of the annual report. total sales and percentage.

  In 2012, the China Securities Regulatory Commission proposed for the first time in the information disclosure rules to "encourage" listed companies to disclose the names of the top five customers and suppliers and their respective transaction amounts in their annual reports.

And in the subsequent revisions of the rules, the tone of "encouragement" has been adhered to.

  In the revision of relevant disclosure rules after 2012, the disclosure requirements for the "top five" have become more and more abundant.

For example, the disclosure requirements for affiliated relationships with companies in the "top five" are added, the disclosure requirements for customers and suppliers that account for more than 50% of the total, and the disclosure of new customers and suppliers is required.

The only reduction in disclosure is that since 2014, regulators have eliminated the disclosure requirements for the top five customers in the notes to the financial report (Table 2).

  It can be seen from this that although there is no mandatory requirement, since 2012, the regulatory authorities have maintained a positive and encouraging attitude towards the disclosure of the details of the top five customers and suppliers of listed companies, and have continuously improved the disclosure requirements.

However, the willingness of listed companies to disclose is contrary to the encouraging disclosure policy.

  Why so?

  Jin Xianghui, an expert who has been engaged in compliance consulting for a long time, told the Securities Times reporter: "Generally speaking, 'encouraging' means that it is not compulsory, and more of a 'voluntary' nature, so listed companies may prefer not to disclose if they do not disclose it. ."

  Jin Xianghui believes that the continuous decline in the disclosure rate of customer and supplier names is due to the gradual increase in the importance of listed companies on trade secrets, and the result of a long-term game between regulators and the regulated.

  "When he (regulatory) does not stipulate, I (listed company) is very cautious. The less specific the regulations are, the less I know what to do. Some companies go to the window to ask for guidance, and usually (get it) Be strict (the answer). Once the rules are publicly encouraged, I know that I don’t need to ask, and I can decide whether to disclose it myself. As long as I can find a reasonable reason, I can not disclose it. There is such a mentality: That is, the broader the regulations, the more uncertain the listed companies are, and the more specific the regulations are, the more they can find countermeasures." Jin Xianghui said.

  When the policy to encourage disclosure was first proposed in 2012, about half of listed companies responded to the policy by disclosing the names of the top five clients.

However, this good momentum lasted only two years, and then declined year by year.

A person familiar with the supervision of letter disclosure said: "After all, there is no coercion, so the exchange actually has no way to pursue why they did not disclose it."

  On the other hand, after 2013, the exchange supervision concept changed from "pre-examination" to "ex-post supervision". In 2016, the Shanghai Stock Exchange canceled the ex-ante application system for information disclosure exemptions, and the information disclosure obligors were prudent according to the standards. judge.

The change in the concept of supervision has increased the independent decision-making power of listed companies on the content of information disclosure, and listed companies will naturally make more favorable choices for themselves.

  Why "voluntary" non-disclosure?

  Since the disclosure of the top five customers and suppliers is more of a "voluntary" nature, why do listed companies tend not to disclose specific names?

  When responding to investors' questions about the top five names on the interactive platform, "trade secrets" are a common rhetoric for listed companies.

In other words, it is a kind of self-protection for listed companies not to disclose the names of the top five customers and suppliers.

  "When the company chooses the content of voluntary disclosure, it is more out of commercial and operational considerations." A senior board secretary of a small and medium-sized listed company admitted frankly, "The current market competition is far more intense than ten years ago, and companies are paying more and more attention to Protection of trade secrets such as names of important customers and suppliers, contract amounts, etc. Companies tend not to disclose in most cases if the policy does not mandate it, but only encourages it.”

  "Besides the name of the main body, I don't want others to see the change. For example, the amount of money I have with this company each year, and the proportion of it, it has changed, and if I don't disclose the name, I can't see it." The aforementioned Dong Secret said.

  From the perspective of listed companies, disclosing customer names may lead competitors to compete for their customers and accurately estimate their production capacity. These potential negative impacts increase the cost of information disclosure for listed companies.

  Secondly, the choice of voluntary disclosure content of listed companies is also affected by other objective factors.

  Wang Jiyue, a senior investment banker, said in an interview with a Securities Times reporter that disclosure is an important principle, not a comprehensive disclosure principle. In addition, disclosure is sometimes not a unilateral decision of a listed company, and some powerful clients will ask the listed company to keep it confidential.

"For example, I signed a contract with Tesla, which is a major benefit to a certain extent. But from Tesla's point of view, I have a business relationship with you, you should keep it secret, I did not allow you to put The cooperation between us is disclosed to the public.”

  From a cost-benefit perspective, listed companies also tend not to disclose the names of customers and suppliers.

In an efficient market, voluntary disclosure of important information will help listed companies obtain a valuation premium and make up for the negative impact of disclosure on operations, thereby enhancing the company's motivation for voluntary disclosure.

However, a survey conducted by Lu Hai, a professor at Peking University's Guanghua School of Management, shows that most Chinese listed companies are neutral or negative about the role of voluntary information disclosure in increasing stock liquidity, raising stock prices, increasing price-earnings ratios, and reducing financing costs. Attitude.

  In other words, listed companies believe that the market does not give corresponding "rewards" to voluntary disclosure of more information, and naturally they are not inclined to disclose.

  Finally, there is a "herd effect" factor in the decline in voluntary disclosure.

  The aforementioned statistics show that the disclosure rate of the top five customers of large-cap listed companies has always been significantly lower than that of small and medium-cap listed companies.

An industry insider told reporters that in the face of regulation, "large-cap companies obviously have stronger bargaining power" and thus have greater autonomy in voluntary disclosure.

  Under the role of "example", the standards of supervision are gradually "proved" by the participants, and then more imitated by other listed companies in industry exchanges.

The aforementioned board secretary said: "I have been the board secretary for so many years, (the letter is covered) as long as you don't force it, but if you just encourage it, I basically don't do it. We refer to some companies that do this (without disclosure), and we (just) follow along. Reference (not disclosed) anymore."

  When more and more listed companies do not disclose, it will trigger a herd effect, which will encourage listed companies that previously disclosed details to choose not to disclose.

  Transparency declines, exacerbating information asymmetry

  During the interview with a Securities Times reporter, many respondents believed that the refusal of listed companies to disclose the names of the top five customers and suppliers not only affected investors' judgment of the company's value, but also exacerbated the information asymmetry in the capital market.

  The industry chain information of the company's upstream suppliers and downstream customers is important information for evaluating the company's value, which has a high degree of consensus among investors in the primary market and the secondary market.

  Yang Shengjun, a partner of Cornerstone Capital, who is engaged in PE investment in the primary market, told reporters: "When we evaluate the investment value of a company, it is very important to see whether the company can establish an industry status. To support this judgment usually requires three Dimensional evaluation, one is the internal growth of the company, the other is to see if there are important industry leading customers to buy the company's products, and the third is to see whether the company has a stable and reliable supply chain system."

  "This means that the evaluation company cannot be separated from the perspective of the industrial ecology. For example, the same amount of sales revenue, whether it comes from low-end customers or high-end customers, has completely different judgments on corporate value. Hiding customer and supplier information will largely Influence our judgment on the company," he said.

  Zhang Yifan, chairman of Duohemei Investment, said that the upstream and downstream information of enterprises is very helpful for stock analysis.

The real-name disclosure rate of listed companies in the key information of the top five customers and suppliers has decreased, which has increased the cost of information search for investors and is not conducive to investment analysis and decision-making.

From the perspective of investors, regulators should urge listed companies to improve the transparency of information disclosure in the industrial chain.

  The opaque disclosure of important information has different impacts on different investors, which exacerbates the information asymmetry between investors of different types and capital sizes.

  An industry analyst from a medium-sized brokerage told reporters that information on the top five customers and suppliers is an important focus of individual stock research. For companies with opaque disclosures, sell-side researchers usually inquire directly with the company, or even "spend money to find the company". The insiders understand that if I give him an interview for 1,000 yuan or 2,000 yuan an hour, and let him tell me, I can also understand.”

Another buyer institution person admitted frankly, "To know the names of (listed companies) customers and suppliers, just ask the seller directly."

  To some extent, the sell-side organization has become an "intelligence" supplier in the context of reduced transparency of information disclosure.

As a buy-side institution, it is easier to obtain "intelligence" from sell-side analysts. For most small and medium investors, public disclosure in the capital market is almost the only way for them to obtain information, and it is much more difficult to obtain such "intelligence" .

  Avoid disclosure or hidden risks

  In addition to causing information asymmetry and affecting investment decisions, listed companies may also hide greater risks behind the deliberate avoidance of "encouraging" information disclosure content.

  Jin Xianghui said: "For example, both are listed companies, and then one is a supplier or customer of the other, (if both parties disclose the names of customers and suppliers), this data can be easily compared and verified. If disclosed They are all replaced by one, two, three, four and five, and no one knows (name), and data verification will be very difficult.” This will also reduce the credibility of financial information to a certain extent.

  In addition, the anonymous alternative disclosure of ABCDE can make the operation of "unrelated transactions" of some listed companies more concealed, and some companies even take the opportunity to implement financial fraud.

  He Jie, an associate professor at the School of Accounting of Zhongnan University of Economics and Law, told the Securities Times reporter: "Some case studies have found that the relationship between listed companies and suppliers and customers is relatively hidden, and there may be false transactions, and it is difficult to identify such relationships. The independence and professional ability of teachers also put forward higher requirements.”

  Among the illegal cases announced by the China Securities Regulatory Commission, many companies have been questioned by the media and investors because of their upstream and downstream relationships, and were eventually proven to be fraudulent.

  For example, in the Guangzhou Langqi financial fraud case, the listed company accumulated false revenue of 12.9 billion yuan by fictitious bulk commodity trade, inflated inventories, etc. In its trade business, the overlapping of suppliers and customers is very common; and the company The names of suppliers and customers are concealed in information disclosure, which increases the concealment of affiliated transactions.

  For another example, in the KDX financial fraud case, the listed company inflated its income and costs by fabricating false contracts and documents, and accumulated inflated profits by 11.5 billion yuan.

Since 2012, KDX has stopped disclosing the names of customers and suppliers. Even when replying to the annual report inquiry letter, it still used the customer number instead. It was finally verified that it had inflated its performance through false customers.

  More typical is the "private network communication" series of mine explosions that will shock the capital market in 2021.

  In July 2021, the Securities Times published an investigative report "90 billion "private network communication" scam", revealing a hidden operation in A-shares for 7 years, involving at least 13 listed companies, and the cumulative amount of more than 90 billion yuan. The financing trade network of the company can be called "the largest capital scam in the history of A-shares".

  In this network, under the guise of "private network communication business", the listed company transfers funds to suppliers in the form of prepayment. The way back to the listed company, the formation of business fiction.

  Among the companies involved, most of the annual reports over the years did not disclose the names of the top five customers, suppliers and prepayments.

A considerable part of them were forced to disclose relevant information only when responding to the inquiry letter.

  It can be seen that the concealment of information on the names of customers and suppliers has greatly reduced the cost of illegal and fraudulent listed companies.

  The transparency of upstream and downstream information needs to be improved urgently

  In the case of "voluntary", listed companies refrained from disclosing detailed upstream and downstream information, resulting in a significant decrease in disclosure transparency. Should supervision emphasize "mandatory disclosure"?

  Tang Xin, a professor at Tsinghua University Law School, said in an interview with reporters that whether or not to enforce disclosure needs to weigh the overall costs and benefits from a perspective that is beneficial to the entire capital market.

  The biggest reason why listed companies avoid disclosure is to "protect trade secrets", which means that the protection of trade secrets and the transparency of information disclosure are in conflict to a certain extent.

He Jie said: “Mandatory disclosure often increases shareholder welfare but harms the welfare of other stakeholders, so it depends on what kind of welfare we value in different situations. Some of our studies have found that suppliers and Disclosure of customer information provides information increment for the capital market, which has a relatively positive effect."

  In the opinion of some market participants, the idea of ​​"protecting trade secrets" is a bit far-fetched.

Cornerstone Capital Yang Shengjun believes that information disclosure affects business operations, which should be only a few cases, "If the company's operations are seriously affected by upstream and downstream information disclosure, it can only mean that the company's business barriers are not high, and competitors are easier to cut. Come in".

What enterprises need to do is to fundamentally improve their competitiveness, thereby enhancing their own industry status and their right to speak in the industry chain, rather than blaming information disclosure.

  Song Yixin, a partner of Shanghai Hanlian Law Firm, said: "Improper information disclosure will lead to the disclosure of business secrets, but the disclosure of business secrets cannot be blamed on information disclosure. Information disclosure has a reasonable scope, because you are a public company and must go to the Disclosure cannot always be said to be a trade secret, and if it goes on like this, the company’s head count will be a trade secret.”

  In addition, according to reporter statistics, over 90% of listed companies disclosed the details of the top five customers and suppliers in their IPO prospectus due to audit requirements.

That is to say, the same content, in the stage of seeking listing, the company can disclose as much as it should, but it becomes a trade secret after the listing is successful, which is obviously unreasonable.

Moreover, the competitors in the same industry that the company wants to guard against most are in the same industry, and most of them know each other well, and there are not many secrets at all.

  Even under the current policy of encouraging disclosure, there is still room for improvement in the disclosure rules of the top five customers and suppliers in order to increase the enthusiasm of listed companies for voluntary disclosure and reduce market information asymmetry.

  The US Securities Regulatory Commission mandates that listed companies disclose customer sales and customer names that account for more than 10% of their sales revenue, and may apply for exemptions under special circumstances.

In China's revised disclosure standards in 2021, the threshold for mandatory disclosure is set at 50% of a single customer or supplier, which is relatively loose.

  Zhang Yifan said that the effect of “encouraging disclosure” can be achieved by increasing the positive benefits of voluntary disclosure of listed companies, such as setting up a scoring mechanism for the content of voluntary disclosure by listed companies, and giving high marks to those with high transparency and quality in information disclosure, and Using the score as a reference for things such as a company's application for refinancing will put "encouragement" into practice.

  The reporter noticed that in the "Content and Format of the Annual Report" (Draft for Comment) released in May 2021, "encourage" was changed to "should", and listed companies were compelled to disclose the names of the top five customers and suppliers. information; although the final revised guidelines are still expressed as "encouraging", this move still shows the China Securities Regulatory Commission's strict supervision orientation for customer and supplier information disclosure, and also reflects the difficult trade-off between the costs and benefits of mandatory disclosure.