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Hello, is anybody there? Corporate accessibility for outside shareholders as a signal of agency problems

Author

Listed:
  • Michael Firth

    (Lingnan University)

  • Chen Lin

    () (University of Hong Kong)

  • Sonia Man-lai Wong

    () (Lingnan University)

  • Xiaofeng Zhao

    () (Lingnan University)

Abstract

Abstract In this paper, we develop a corporate accessibility measure for publicly listed firms in China based on their responses to outside market participants’ attempts to communicate with them (via telephone, e-mail, and online discussion forum), and examine whether the provision of corporate accessibility signals the incidence of agency problems. We find robust evidence that non-accessible firms are associated with more agency problems, manifested in greater tunneling of corporate resources through inter-corporate loans and related-party transactions, greater consumption of managerial slack, more earnings management, and a higher probability of committing corporate fraud. We also find that non-accessible firms are more likely to conduct value-destroying acquisitions than accessible firms. Furthermore, we find that non-accessible firms underperform accessible firms in both firm valuation and operating performance. Overall, our results suggest that a firm’s decision to provide corporate accessibility is a value-relevant signal for informing investors of the severity of agency problems in publicly listed firms.

Suggested Citation

  • Michael Firth & Chen Lin & Sonia Man-lai Wong & Xiaofeng Zhao, 2019. "Hello, is anybody there? Corporate accessibility for outside shareholders as a signal of agency problems," Review of Accounting Studies, Springer, vol. 24(4), pages 1317-1358, December.
  • Handle: RePEc:spr:reaccs:v:24:y:2019:i:4:d:10.1007_s11142-019-09501-3
    DOI: 10.1007/s11142-019-09501-3
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    More about this item

    Keywords

    Corporate accessibility; Agency problems; Direct communications; Signaling;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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