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The Correlation Study On MD&A Information Disclosure Quality And Agency Cost

Posted on:2014-05-31Degree:MasterType:Thesis
Country:ChinaCandidate:X M LiFull Text:PDF
GTID:2269330425464410Subject:Accounting
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In January2012, CSRC issued Information Disclosure Contents and Format Code No.30of Companies Issuing Securities in Public-Growth Enterprise Market Opinion. The major trend is from nuances, with the development of securities market and reform of disclosure rule, MD&A will be more concerned and gradually become a potential stock in the information of capital market.MD&A endows the management with a "line drawing" space in the financial market. Although the space is small, it contains various information. It contains two major parts:"historical information review" and "forward-looking prospect" as well as more than30details. The existence significances of MD&A are as follows:first, it is the context information of "financial data". Financial data are the historical operation results of enterprises, it is difficult for programmed and mechanical financial indicators to interpret their generation and deep reasons. The further analysis of MD&A on the company’s operation background, special circumstance, key non-financial information of companies improves the efficiency of enterprise.Concerning the analyses mentioned above, as a powerful tool of information disclosure, whether MD&A could help reduce agency costs or not? There exists two forms of agency costs for modern enterprises:the first form between shareholders and management; the second form between majority and minority shareholders. As is demonstrated in a wealth of literature, information disclosure of high quality is a significant showing of capital market "openness". It can reduce information asymmetry and curb agency costs as well. Financial information plays the role of governance, restraining managers and majority shareholders from expropriation. As an important member of enterprise information disclosure, the quality of MD&A may exert an effect on agency cost. The thesis conjectures that there exist a negative correlation between the quality of MD&A information disclosure and agency cost. Therefore, this paper takes example of199enterprises in Shanghai’s manufacturing industry in2010and studies on the relationship between their MD&A information and their agency costs of the following year.This article is divided into six chapters:The first, second and third chapters respectively refer to introduction, literature review and theoretical analysis. By literature and theoretical analysis, we explore why the quality of MD&A disclosure of information has inhibited effects on agency costs. Accordingly, we put up with three mechanisms, this is, MD&A is the background of the financial information, it can improve the "information differentiation" problem, and also it have the function of corporate governance. Thus, we can surmise that it could increase the degree of investor protection, and reduce the information asymmetry; thereby we can control the agency costs. The fourth and fifth chapters respectively refer to the study design and empirical analysis. This section has three bright spots. Firstly, we set up self MD&A disclosure of information quality index. Secondly, the forward-looking information disclosure quality is measured by whether to disclose the "revenue plan ".Lastly, we control variables and consider "inverted U relationship" between the proportion of the largest shareholder and the agency costs, thus we split into two variables control. The sixth chapter is studying the conclusion. By theoretical analysis and empirical analysis, we confirm that MD&A and the management expense ratio is significantly negatively correlated; while MD&A is positively correlated with the asset turnover, but not significantly; MD&A and the degree-of encroachment of large shareholders’ funds is significantly negatively correlated. Disclosed in the forward-looking information "Income Plan" can inhibit the management expense ratio, improve asset turnover, reduce the large shareholders’ funds of the degree of occupation, and are significant in the statistical sense.Contribution of the paper:(1) in the existing literatures, there is no article discussing the direct relation between MD&A information disclosure quality and agency cost.(2) We establish MD&A information quality disclosure rating form by ourselves in this paper. Compared with the previous literatures, auxiliary rating methods to information difficult to be defined are added in this paper, making the rating form more applicable and operability stronger.(3) Against the survey of forward-looking information, with whether to disclosure "income plan" as the independent variable, its influence on the agency cost is explored. Shortcomings: (1) the selection of samples is not so wide, the samples are concentrated in manufacturing industry and the smaller samples are not persuasive enough. The nature that asset is emphasized in manufacturing industry will cause some influence when asset turnover ratio is adopted to measure the agency cost.(2) Content analysis method is adopted for MD&A information rating in this paper, which is of a certain subjectivity and deviation.
Keywords/Search Tags:Management’s Discussion and Analysis(MD&A), Agency costsInformation disclosure quality, Forward-looking information
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