Empirical Research On The Managerial Entrenchment And Information Disclosure Quality

Since1990, Shanghai and Shenzhen stock exchanges established, China’s listedcompanies has begun to disclose accounting information officially. Accounting informationdisclosure quality of listed companies, to a large extent, affect the efficiency of securitiesmarkets, but the quality problem exist in current accounting information disclosure of listedcompanies in China has become a major factor to obstacle the development of China’ssecurities market. It is lack of confidence to investors so that the allocation of resources willbe inefficient or unreasonable, and it has seriously affected the function of China’s securitiesmarket to play.In the information asymmetry and incomplete contract, conflicts of interest between themanagers and shareholders will cause managers hold the position and maximize theeffectiveness of their position by means of management entrenchment. As a hypothesis ofManagerial entrenchment, It originated the research of the relationship between the insiderownership and the performance of the company. This hypothesis thought that managers whohold share may cause them to pursue the value maximization decision, which may not bebased on company value maximization, to meet the individual interests and prevent to bereplaced. The existence of managerial entrenchment will lead to managers do inconsistentdecision and behavior contrary to shareholder interests. As a representative of the companyinsiders, managers and the big shareholders who have control power have motives andcapabilities of deprivation behavior, management and control of the information disclosure isthe benefit expropriation of insiders. Although big difference compared to previousliterature about the motivation of emphasis on agency, but have the same impact, they all cancause the conflict between managers and shareholders and create agency cost. In recent years,the question of information disclosure has been increasing attention. Domestic and overseasscholars had studied information disclosure quality from corporate governance, externalsupervision and governance environment, although many scholars analyzed factors on thequality of the information disclosure from corporate governance, but few people made thelink between managerial entrenchment and information disclosure quality.The paper is based on theory, use the experience data of Shenzhen stock market andmultiple linear regression model to analyze2008-2010,2285sample company.found that: The managerial entrenchment level has been increasing, it shows that managers take thedefense measures. In order to make his position more stable. Managerial entrenchment levelhas negative relation with quality of information disclosure, this suggests that the highermanagerial entrenchment level, the lower the quality of information disclosure. Themanagement share ratio has positive relation with information disclosure quality, companieswhich allow managers to hold a certain number of stock can alleviate the conflict of interestbetween shareholders and managers, and improve the quality of information disclosure, itshows that the manager holdings as a means of incentive can play a good role.