The Transparency Of MD&A And Influencing Factors Analysis

Management Discussion and Analysis (MD&A) is most important part in the financial reports of listed companies, which gives the traditional reports flexibility, dynamic and foresight, and thus has high value-relevance for decision making. However, most of the MD&A is qualitative description, so the quality of the information becomes the focal & difficult point. How is the quality of MD&A and what are the factors that influence the quality of MD&A? All above is the focus of understanding the value of MD&A.Given the differences in MD&A in industries and MD&A’s specific value to specific industry, the paper studied the general quality of MD&A and its influencing factors based on the listed companies in our software and information tech service industry from Shanghai Stock Exchange and Shenzhen Stock Exchange. First of all, the paper designed the index system to assess the quality of MD&A by scoring different items of MD&A through reference to the previous studies and the related progress of latest practices. Second, we picked up independent variables from the perspective of supply chain of information, whose process includes the information producing, information disclosure and information assurance, specifically to MD&A, these above variables includes the company’s performance, ownership, corporate governance, internal control and auditing. Besides, since the producing of MD&A involved subjective judgment and experience of the management, we studied whether there existed experience accumulation effect in the producing of MD&A, i.e, whether the quality of MD&A in the past period influenced the MD&A in report period.We found that, on the one hand, the quality of MD&A was not that satisfying in the companies of software and information tech service industry, the general score was just the half, besides, there was no significant differences in these companies, which meant the industry homogeneity in some degree. On the other hand, the equity structure, the effectiveness of internal control and the quality of MD&A in the past period of the company affect MD&A quality, which is, the more scattered equity structure, more effective internal control & higher quality MD&A in the past period contribute to the high quality of MD&A. Through the results of this study, we expect it will help the companies and the law-maker find new way to improve the information value of MD&A.