Research On The Motivations And Economic Consequences Of Non-Financial Information Disclosur

Non-financial information refers to various information materials related to the production and business activities of listed companies,typically in the form of unstructured data such as text information.The capital market is paying unprecedented attention to the disclosure of non-financial information.According to a survey conducted by EY’s global investment institutions,97% of investors indicate that they evaluate companies based on non-financial information disclosure,and 85%of investment institutions would exclude companies with negative social impact from their investment portfolios.From the perspective of the generation and pattern of non-financial information,even the world’s best emerging companies are facing challenges and difficulties in disclosing non-financial information.In recent years,as non-financial information has increasingly become a significant portion of the information disclosed by companies,and disclosure styles have continued to become more complex,the textual characteristics of non-financial information disclosure and the underlying motivations behind them have gradually attracted attention from regulators and academia.According to relevant research,management will use language features in non-financial information disclosure to create a large amount of "fuzzy elements".Moreover,this language that has been "packaged" can mislead information users’ decision-making at the micro level,which in turn will have a negative impact on irrational stock price performance and even the abnormal fluctuations of the entire market.Previous research on the motivation behind non-financial information disclosure has mainly focused on management’s manipulative behavior,neglecting the fact that controlling shareholders,as the controllers of the company,may also have an interest in expropriation that could affect the company’s information disclosure decisions.Especially when in the state of equity pledge,controlling shareholders may encourage the company to issue obscure annual reports to cover up unfavorable information,reduce negative tones,and possibly increase positive tones,in order to avoid the risk of transfer of control caused due to a drop in stock price.For example,during the period when its major shareholder pledged its equity,Le TV manipulated the disclosure of non-financial information in its annual report for market value management,while using more positive and optimistic vocabulary to conceal unfavorable information.This ultimately led to a collapse in stock price and harmed the interests of investors.Therefore,analyzing the motivations and economic consequences of non-financial information disclosure,improving the quality of non-disclosure information of listed companies,is not only the core of maintaining a fair and just capital market but also an essential means of protecting investors.To comprehensively investigate this important issue,this article employs empirical research based on the tone and readability data of non-financial information in annual reports of listed companies.It examines the motivation,influencing mechanisms,and economic consequences of equity pledge violations in non-financial information disclosure by listed companies.The specific research content and conclusions are as follows:First,this article examines the motivation behind non-financial information disclosure using the tone data of management from listed companies and data on equity pledges by controlling shareholders from 2007 to 2020.The study mainly investigated the impact of equity pledge behavior by controlling shareholders on the tone of management discussion and analysis in annual reports of A-share listed companies in China,and conducted heterogeneity analysis from the perspective of equity nature.The study finds that listed companies with equity pledges by controlling shareholders,as well as those with larger equity pledge scales,tend to have a more positive tone in the management discussion and analysis section of their annual reports.This confirms the existence of a behavior where controlling shareholders tend to beautify non-financial information disclosure by listed companies after pledging their equity.However,this conclusion is mainly significant in non-state-owned enterprises.Based on empirical analysis,this paper also found that the internal governance and operating conditions of listed companies can affect the behavior of non-financial information disclosure after equity pledge.The dissertation then analyzes the ability of analysts,as information intermediaries,to identify non-financial information disclosed based on the motivation of interest expropriation.Through examining the sensitivity of analyst forecast revisions to management tone,this paper investigates the ability of analysts to identify distorted information based on the motivation of interest expropriation.Empirical research shows that Chinese securities analysts have a certain ability to identify non-financial information disclosed by listed companies based on interest expropriation motives,but this is mainly done by star analysts.Secondly,institutional investors can partially replace analysts in identifying the expropriation behavior of management in non-financial information disclosure,thus reducing the impact of non-financial information in annual reports on analysts’ earnings forecast revisions.The article also concludes that through analyzing the moderating effect of controlling shareholders’ equity pledge on the tone of analysts and management,analysts can effectively "identify" the market value management motives behind the disclosure of management tone.Finally,this article examines the economic consequences of disclosing non-financial information based on the motive of expropriation from the perspective of stock price collapse risk.The empirical results show that: with the increase of management tone in the annual report of listed companies,the risk of stock price crash also increases significantly.The poorer the readability of the annual report text,the more significant the risk of stock price collapse of listed companies.This empirical conclusion shows that the management and the controlling shareholders tend to manage the negative information of the enterprise based on their egoistic motivation.This dissertation once again verifies the above core views by analyzing the moderating effect of controlling shareholders’ equity pledge on management tone and the risk of stock price crash.Furthermore,based on the nature of the management tone disclosed by management,the article finds that increasing the disclosure of positive management tone significantly increases the risk of stock price collapse,but increasing the disclosure of negative management tone can reduce the risk of stock price collapse.At the same time,this article also analyzes the possible influencing mechanisms from the perspectives of regional location and analyst attention and finds that the mechanism of analyst recognition plays an important role in the impact of management tone disclosure on the collapse of company stock prices.The main findings of this article are as follows: Listed companies with larger equity pledges by controlling shareholders tend to have more positive tone in their non-financial information disclosure and lower readability of textual information,indicating the existence of market value management behavior.However,analyst teams,as financial intermediaries,are able to effectively identify the more aggressive disclosure behavior of listed companies based on the motivation of interest expropriation.By analyzing how analysts identify this transmission mechanism,the disclosure of non-financial information based on the motivation of interest expropriation can increase the risk of a company’s stock price collapse.The conclusions drawn provide a decision-making basis for the non-financial information disclosure system and the creation of a good disclosure environment,and also help regulatory agencies and academia to better understand the motives behind non-financial information disclosure and their underlying logic,providing important theoretical references and policy implications for improving China’s non-financial information disclosure system,guiding companies to optimize their corporate governance mechanisms,and strengthening the protection of investors’ rights and interests.This article may contribute in the following three aspects:(1)This paper provides theoretical guidance for improving the quality of non-financial information disclosure by listed companies under the registration system.Drawing on the practice of China’s capital market,this paper focuses on two text features of non-financial information disclosure by listed companies: tone and readability.By combining the agency theory of corporate finance with information economics and behavioral finance theories,this paper analyzes the motivations and economic consequences of non-financial information disclosure from the perspective of controlling shareholder stock pledge.This breaks through the traditional theory of information asymmetry and provides case examples and theoretical guidance for improving the readability and effectiveness of information disclosure by meeting the requirements of "conciseness,clarity,simplicity,and understandability".(2)This paper constructs a localized indicator for measuring non-financial information of companies-management tone.Based on the analysis of a large number of practices and cases in the Chinese capital market,this article clarifies the connotation of non-financial information disclosure research,and combines the research methods from linguistics,discourse analysis,and financial technology,etc.to construct the management tone in the annual report text of listed companies as a localized indicator for measuring non-financial information of companies.Then,using this indicator to study the motivations and economic consequences of non-financial information disclosure,it can provide reference for future related research.(3)The research findings of this paper have important practical implications for both regulatory authorities and investors in their decision-making regarding non-financial information disclosure.On the one hand,it helps regulatory authorities gain a more comprehensive understanding of the current status and issues related to non-financial information disclosure,regulate the information disclosure behavior of listed companies,improve the quality of information disclosure,and provide theoretical references and decision-making basis for improving regulatory measures and self-regulatory mechanisms.On the other hand,it serves as a warning to external investors,reminding them to pay attention to the potential information contained between the lines and to uncover the true intentions behind non-financial information disclosure behavior.Finally,it also helps capital market information users to avoid decision-making errors due to misleading management tone.It is not only necessary to "listen to their words," but also to "observe their actions" in order to improve the efficiency of social resource allocation.