The Effects Of Corporate Diversification On Accounting Information Quality Under The Moderating Effects Of Media

Diversification strategy has been adopted by many listed companies in China. Previous researches mainly discuss the ?value effect? of diversification and offer mixed results. For the sake of investors, our paper examines the impact of diversification on accounting information quality, as well as whether media can reduce the negative effects of diversification as an external governance mechanism.Our paper uses the asymmetric information theory, principal-agency theory and internal capital market theory to analyze the impact that different types of diversification may have on accounting information quality. Then, by r eviewing the external governance theory, reputation theory and market pressure theory, we analyze why it is appropriate to introduce media as a moderator and how the media can play a role in corporate governance. Ultimately, we use the segment data of Chinese A-share listed companies from 2009 to 2012 to empirically examine our hypotheses.Our results show that industry diversification will damage the accounting information quality,and this damage is mainly derived from unrelated diversification. On the contrary, geographic diversification is significantly positively correlated with accounting information quality, but due to statistical limitations, we shouldn't jump to the conclusion. Furthermore, as external corporate governance mechanism s may have an influence on the effects of corporate strategies, we introduce medi a as a moderator into the model. And the results prove that under th e industry diversification circumstance,more media coverage as wells as good media environment can improve the accounting information quality. But under geographic diversification circumstance, media don't show such effects. Our research provides helpful evidences for the regulators to make related policies.