Hello, is Anybody There? Corporate Accessibility for Outside Shareholders as a Signal of Agency Problems

Review of Accounting Studies, forthcoming

56 Pages Posted: 1 Jul 2014 Last revised: 3 Apr 2019

See all articles by Michael Firth

Michael Firth

Lingnan University - Department of Finance and Insurance

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Sonia Man-Lai Wong

Sun Yat-Sen University (SYSU) - Department of Finance and Insurance

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance

Date Written: April 2, 2019

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.

Keywords: Corporate Accessibility, Agency Problems, Direct Communications, Signaling

JEL Classification: G30, D82, M41

Suggested Citation

Firth, Michael and Lin, Chen and Wong, Sonia Man-Lai and Zhao, Xiaofeng, Hello, is Anybody There? Corporate Accessibility for Outside Shareholders as a Signal of Agency Problems (April 2, 2019). Review of Accounting Studies, forthcoming. Available at SSRN: https://ssrn.com/abstract=2461112 or http://dx.doi.org/10.2139/ssrn.2461112

Michael Firth

Lingnan University - Department of Finance and Insurance ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China
+852 2616 8160 (Phone)
+852 2466 4751 (Fax)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sonia Man-Lai Wong

Sun Yat-Sen University (SYSU) - Department of Finance and Insurance ( email )

Tuen Mun
Hong Kong

Xiaofeng Zhao (Contact Author)

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Tuen Mun
Hong Kong

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