Disclosure Quality Rankings and Stock Misvaluation – Evidence from Chinese Stock Market

Zhu, Yinghong; Ho, Kung‐Cheng; Shen, Xixi; Shi, Liwei

doi:10.1080/1540496x.2019.1700499

Cited by 6 publications

(2 citation statements)

References 44 publications

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“…Higher information disclosure quality can improve market performance and boost a firm's financial indicators (Chu et al, 2019;Wang et al, 2019). In addition to being significantly and positively correlated with company performance (Jiao, 2011), information disclosure reduces leverage risk (Pan et al, 2015), market value deviation (Zhu et al, 2020), and stock price delay risk (Gong et al, 2019) and increases accounting conservatism (Shen et al, 2021) and stock liquidity (Schoenfeld, 2017). Barth et al (2017) decompose enterprise value into liquidity, capital costs, and expected future cash flow.…”

Section: Literature Reviewmentioning

confidence: 99%

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Information disclosure ratings and managerial short-termism: An empirical investigation of the Chinese stock market

Huang

Liu

2021

Int Entrep Manag J

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Information asymmetry between managers and outside investors creates agency problems and impedes efficient capital allocation. Information disclosure is critical in alleviating information asymmetry in capital markets. This study investigates the effect of information asymmetry on managerial short-termism by examining information disclosure ratings (IDRs). Using real earnings management as a proxy for managerial short-termism, our analysis of a sample of Chinese A-share companies during 2001-2018 indicates that high IDRs mitigate managerial short-termism. The results also indicate that the effect of IDRs in reducing managerial short-termism is driven mainly by stock liquidity. This conclusion holds after consideration of endogeneity and application of two-stage least-squares and generalized method of moments methods, adjustment of the definition of IDRs, consideration of alternative proxies for managerial short-termism, and control for firm characteristics that might affect the extent of managerial short-termism. This study also examines the effects within three subsamples: companies listed on the Shenzhen Stock Exchange main board, small and medium enterprise board, and growth enterprise market board. IDRs substantially reduce managerial short-termism among firms listed on all three boards. These findings indicate that enterprises have corrected previous internal governance problems, and IDRs have helped to improve internal governance through stock liquidity. Therefore, external supervision also helps to reduce the agency problem of managerial short-termism.

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Section: Literature Reviewmentioning

confidence: 99%

“…Each firm is assigned an IDR of A (the highest grade), B, C, or D (the lowest grade) based on these measures. An A (D) rating indicates that a firm is assessed to have the highest (lowest) degree of corporate transparency and few (many) information barriers between its managers and investors (Zhu et al, 2020).…”

Section: Dependent Variable: Measures Of Idrmentioning

confidence: 99%