Press Coverage,Disclosure And Agency Cost

Under the separation of ownership and control,inconsistent interest and asymmetric information between principal and agent lead to the agency problem.Mandatory disclosure system plays a key role in improving this situation by forcing listed companies to reveal information,restraining the agency problem by direct and indirect ways.The dissemination of information makes itself into a regulatory mechanism,and creates the preconditions for kinds of corporate governance mechanisms.Financial media is an important information intermediary,can help to increase the quality and transfer efficiency of information,influencing how disclosure affects agency cost.Therefore,based on the intermediation of press coverage,we discuss the relationship between disclosure and agency cost.On the basis of the agency cost theory and related research,we firstly analyze the mechanisms of the impact on agency cost.Asymmetric information theory,principal-agent theory and reputation theory provide theoretical support,pointing out that disclosure is able to control agency problem through media path,reputation path and regulation path.Press coverage can improve the effect of disclosure.Secondly,we discuss the situation of disclosure and press coverage.Results show that listed companies perform well on disclosure,but they are reported in a quite different frequency.Then we test the relation between disclosure and agency cost empirically,and find out whether press coverage has positive influence on the effect of disclosure.The empirical results show that disclosure is correlated to administration expense ratio negatively and total asset turnover positively.The interaction shows that press coverage can improve the governance function of disclosure.The study results confirm that enhancing the quality of disclosure can suppress the opportunistic behaviors of the management,reducing agency costs.As press coverage can play an information intermediary role in promoting the transfer of information,it has positive effect on the relation between disclosure and agency costs.