The Effect Of Media Exposure And Information Disclosure Quality On Agency Cost

Principal-agent Theory is one of the most abundant theoretical systems in the field of economics in recent decades. The research of alleviating agency problems is the important subject of modern corporate governance. With special institutional environment, domestic scholars put forward the measures to reduce the agency cost. In our country, the first kind agent cost, namely the agency cost between investors and managers, and the second category of agency costs, namely the agency cost between large shareholders and small shareholders, are two of the most common types in the capital market. Despite the different classification, they are both due to the asymmetry of information.Agency problem is widespread in the capital market of China, which serious damages to the legitimate rights and interests of investors. People have lost faith in the capital market because of common scandals. When interests are violated, small and medium-sized shareholders can only hope that the supervision department would punish violations of the company. Scholars tend to study the field from theory and find a way to radically reduce agency costs.In view of the principal-agent theory, the key problem of modern enterprise is to create a set of incentive effect of the contract to control and reduce the adverse selection and moral corruptions behavior of managers. In order to reduce the agency costs, we can start from the aspects of internal and external mechanisms.Internal governance mechanism of agency problems is to regulate right and obligation of managers through a reasonable agent contract. Shareholders would motivate or constraint their managers by the board of directors, corporate governance system, incentive system and so on. According to the root cause of the problem of agency, these mechanisms can play a role from two aspects. From the point of the assimilation of objective function, the company tried to tie the managers’ own interests with the shareholders’together as much as possible, such as giving managers options and more performance rewards. From the view of reducing information asymmetry, the system of information disclosure could effective constraint on managers’ self-interest behavior. With the expansion in the research field of the agency problem, it is found that information disclosure not only can constraint managers’ working behavior, but also helps to reduce agency problem such as the big shareholder’ tunneling behavior and asset substitution. Therefore, information disclosure system can form a wider impact on the scope. On the other hand, compared with personalized internal incentive system, the system of information disclosure is more formal, which effectiveness is guaranteed by the regulatory and legal system. So people study the influence mechanism of information disclosure and perfecting the rules, which undoubtedly has important theoretical and practical significance.From the outside to reduce agency problems, it mainly includes the system of legal supervision, the improvement of capital market, the competition in manager market and so on. The power of the external governance is especially obvious in the capital markets of developing countries. Because of the lack of a sound legal system and institutional constraints, there are a lot of agency problems in capital market in China. Under the background of system lack, many victims of agency problem put forward demands through media. The Watchdog role of media also gets the attention of scholars. Medias can make use of their own favorable conditions to collect and organize information, and then pass to the masses of information demanders. As a result, investors could obtain the required information with a little time and cost. Therefore, media suppresses the agency costs by reducing information asymmetry, which helps to protect the interest of the investors.So the disclosure of information and media supervision are internal and external means to govern the question of agency in China. The mechanisms are similar, but the market effects caused are different. Therefore, the combination of formal information disclosure system and external media supervision may reduce the information asymmetry in capital market better.This article studies agency cost from the perspective of media supervision and information disclosure quality. There are5chapters in total.Chapter1. In this chapter, firstly I elaborate the research background; analyze the sources of the agency cost problem and existing governance mechanism. And then I put forward the main research problems from the perspective of media supervision and information disclosure quality. I set the specific research methods, ideas and framework, and finally summed up the innovation and contribution of this article.Chapter2. This part is mainly on review of related literatures concluding media supervision, information disclosure quality and agency cost. And then I put forward a new perspective.Chapter3. This section will first define the concept of the three research object. Then based on the theory of government regulation and reputation, I sum up the influent path of media supervision to agency cost; based on the information asymmetry theory, I sum up the influent path of quality of information disclosure to agency cost. Finally, I put forward a viewpoint that there is interaction between media supervision and information disclosure quality in the impact on the agency cost.Chapter4. In this section I put forward the research hypothesis combining with previous theoretical analysis and previous research results. Then combined with the relevant control variables, I build corresponding model and carry on the regression analysis. The empirical results show:media supervision and information disclosure quality can reduce agency costs; there is interaction between media supervision and information disclosure quality in the impact on the agency cost.Chapter5. This part is the summary of the full text. And then I put forward relevant policy suggestions accordingly.The contribution of this paper is mainly the following three aspects.First of all, I introduced information disclosure quality and the media supervision as internal and external mechanism of inhibiting agent cost. By studying the influence on agency costs, I verify the media supervision and information disclosure quality play positive roles in inhibition on the question of agency cost.Secondly, this paper studies the media supervision and information disclosure quality interaction on the inhibition of agency costs. The effect has significant substitution was confirmed.At last, the agency cost is divided into equity agency cost and the agency cost between shareholders. Because of more specific object of study, its conclusion is more reference.In this paper, there are also research limitations as follows:First, media ranges from the traditional newspapers and magazines, television, radio to Internet. But in addition to the press, there is lack of specialized database. So in this paper, the study on media coverage is limited to the newspaper. Sample source is not comprehensive.Second, because of the influence of subjective factors, the media reports are not further subdivided into positive news, neutral news and bad news to research the influence of different types of reports on the agency cost. And how to avoid the influence of subjective factors, categorize media reports, form a quantitative standard, are the focus and direction of the later research.Third, this paper do not include the third type of agency cost (debt agency cost) in the agency cost research. This is due to the difficulty in measuring and serious lack of data. Hope to find the complete data or method, so as to perfect the related research of agency cost.Finally, the empirical result about the agency costs of state-owned enterprises is not the same with the most literatures. It is necessary to increase the time span of the sample and establish a proper model for further verification.