The Gem "management's Discussion And Analysis" Disclosure Empirical Study

Management Discussion and Analysis (hereinafter referred to as MD&A), first putforward by the United States, refers to the evaluation of the operation state in the pastand the prospective judgment of the trend in the future for the listed companies. ChinaSecurities Regulatory Commission introduced in the system of MD&A in2001, andstrengthen the relevant regulations in2005. In2009, Chinese Growth Enterprise Market(GEM) was ready to launch and the CSRC modified several regulations in the MD&Adisclosing part to make it more in line with the characteristics of the gem companies.In this paper, the study chooses annual reports of gem companies in2009and2010.On the basis of previous studies, this paper builds the MD&A information disclosureclassification and marking standard table (include two parts nine categories of29project), to compare and understand the disclosure situation of Chinese gem companiesat present. The next step is to select different variables such as the company's size,profitability and financial leverage, industry, corporate governance structure, externalaudit institutions and the company registration place to further analysis the influencefactors of information disclosure on gem companies.This paper introduces the background and significance of the subject firstly, brieflyreviewed the evolution of the MD&A information disclosure in USA and China, listedMD&A disclosure requirements of gem companies, and introduced the relevantliterature study on MD&A information disclosure among the domestic and overseasscholars. Several existing problems have been found out during the study on MD&Ainformation disclosure situation for gem companies, including that minority of gemcompanies don't disclose MD&A information compliance with the code; emphasizingthe disclose of apparent business performance but neglecting the actual analysis forassets' quality; templated disclosure phenomenon is serious; besides, predictivedisclosure and voluntary disclosure is not strong enough yet.In the regression analysis to the total score, history information score, prospectiveinformation score and nine projects points, this paper selects some variables to completestepwise regression, and comes to a conclusion that the overall situation has nosignificant relationship with the variables selected, thus the paper further analyzes thehistorical information, prospective information and nine partial disclosure factors. Theempirical results show that history information disclosure has a positive correlation withthe developed locations for the listed companies, and prospective information disclosure is negative correlated with ownership concentration. Specific correlations to each partare: the "overall management during the reporting period" in history informationdisclosure part is negative related with the company's financial leverage; the disclosureof "changes in financial data" is positive correlated with the company's profitability incurrent period and the developed locations; the disclosure of "operation andperformance analysis for the main subsidiary and joint-stock companies" part is positivecorrelated with the company's profitability in current period and negative correlatedwith the company's size;"main business operation state" and "the reveal of nonfinancialinformation related to the operation " part are found no significant correlations withselected variable; in the forward-looking part, the disclosure of "industry trends and thecompetition pattern" has a negative correlation with both the company's financialleverage and external audit institutions hired; the disclosure of "strategic developmentand planning" is negative correlated with the company's profitability in current period;"capital demand, use and sources" section's disclosure is negative correlated with theownership concentration and the company's industry, yet has a positive correlation withthe company's profitability in current period;"risk disclosure" part's disclosure ispositive correlated with the company's profitability in current period and the proportionof the independent directors.Finally, this paper makes suggestions on gem companies MD&A informationdisclosure system, on the basis study of the foregoing analysis, so as to perfect gemcompanies MD&A information disclosure requirements and have a positive effect onimproving the disclosure and supervision for the listed companies' managementdiscussion and analysis. Specific suggestions including establish MD&A as theindependent status information disclosure, perfect MD&A information disclosureframework; detailed information disclosure requirements, emphasize the informationanalysis and substantial analysis; establish MD&A information disclosure system ofrewards and penalties, the introduction of transitional "safe harbor" system.