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Asymmetric information on the impact and governance of listed companies

Author: LiangYan¡¡YanLong From: www.yourpaper.net Posted: 2009-12-30 19:34:42 Read:
[Abstract] due to the complexity of accounting information and the use of staff diversity, the problem of information asymmetry exists in the listed companies, as well as its type, adverse selection, moral hazard, this paper analyzes the adverse effects of its listed companies, and constructive pointed out that the information asymmetry to strengthen control and provide a future-oriented accounting information ª¤
Key words information asymmetry control accounting information

Environment faced by the financial accounting and reporting is very complex and challenging. The accounting information is complex, one of the reasons is the response to information of each person is not the same. For example, for a shrewd investor in terms of assets to market value assessment beneficial to help him predict the future performance of the company, so that he would be the market value assessment takes a positive attitude. For some investors, they may feel that the market value is not reliable, or just accustomed historical cost information, so it may take a negative attitude towards assessment of this value. The information asymmetry generated personal reasons, of course, as well as its market effectiveness reasons. In the ideal environment of accounting, information managers, investors, creditors, and small shareholders master, there is no asymmetry, the best state, however, does not exist. The two main manifestations of asymmetric information. Adverse selection (adverse selection). The information asymmetry second type is a moral hazard (moral hazard) they have an impact on listed companies.

, Information asymmetry on the corporate governance of listed companies impact
Corporate Governance is set precisely or informal, a combination of internal and external system or mechanism to coordinate the relationship between the interests of the company and all stakeholders to ensure that the company's decision-making more scientific and thus the final maintenance company interests. For managers, the most useful information is the "rigidity" of information, and that the company's effort is highly correlated with their business information. However, the relevant information for investors, such as the market value of the assets, liabilities, this kind of information on the net profit reported is very uncertain. And to some extent, a reliable market value is not readily available. And, based on market price information is more likely to be distorted and manipulated. Of creditors in terms of them harder to accurately obtain the information they need, which is mainly caused due to information asymmetry. These types of effects have diminished the degree of relevance of information management efforts. Because there can only be a copy of the financial statements, corporate governance issues should be how to reconcile the different role of accounting information. In corporate governance following asymmetry.
Owners and operators of asymmetric information
Enterprise system that enjoyed by owners of the residual claim and ultimate control over the operators paid according to the contract and enjoy general control over the operators can only get a fixed remuneration, and there is no residual claim its the effort is likely to be out of proportion to income and unable to fully mobilize the enthusiasm of the operators; same time, due to the asymmetry of information, the owner can not fully grasp the enterprise's internal information, and can not control the behavior of the operators, thus creating a reverse selection and moral hazard. The one hand, operators aware of their work effort can not be fully aware of, and will choose between the effort and work hard work hard, but will not get paid because of the the effort cost relatively large multi. On the other hand, due to operators enjoy the operation of the business decision-making power, it will take advantage of the supervision of the owner and high-risk business, because doing so can improve its reputation, but without any risk, or using their position to facilitate lazy and opportunistic activities for personal gain, damage to corporate and shareholder interests, thereby creating a moral hazard.
Creditors and management information asymmetry
Debt financing, the creditors and the enterprise will generate agency costs due to information asymmetry. From capital lent as a creditor has already lost control of the capital, because the right to participate in company decision-making, you can not understand the company's internal information and capital operation status, and thus the risk of lending capital will not be able control, which resulted in the problem of information asymmetry of the creditor and the enterprise. Similarly, this information asymmetry may lead to adverse selection and moral hazard of the business of the creditors, resulting in creditors and corporate agency costs. 3 large shareholders and minority shareholders of asymmetric information
In the governance structure of listed companies, major shareholders tend to occupy the important position of the Board, to have a say in the major decisions of the company, and more access to the company's financial situation and other internal information. On the other hand, due to the dispersion of equity, minority shareholders often do not have ability to lack of motivation to take the initiative to obtain information on insider supervision, they often take the form of the "free-rider" depends on the supervision of large shareholders to earn money. With principal shareholders and small shareholders had a problem of information asymmetry, adverse selection and moral hazard problems under the assumption of rational man, will also produce this information asymmetry between the principal, thereby increasing the company the cost of governance.
Shareholders between information asymmetry afterwards results is the largest shareholder of its holding position to occupy an important position of the Board of Directors, or so the corporate decision-making, even by the replacement of management to control the general business affairs, so as to more fully grasp the company's internal information. Aware of the small shareholders of the lack of internal information, once there was an opportunity, the major shareholders may change to raise funds to invest capital into high-risk or benefit the largest shareholder in the project, it is also possible to control the use of the funds covertly transfer funds for their own profit, thus forming the largest shareholder of the moral hazard problem, causing adverse effects to the general investors and the healthy development of the capital market.

Second, to solve the information asymmetry in the corporate governance of listed companies the main way
Relevance and reliability - both weighed against the resulting information is the most favorable of all information users information. Related information to investors that can be used to assess the future economic development of the information, and reliable information is accurate and will not be manipulated by the authorities. Governance on information asymmetry problem the author provides two suggestions:
1. Provide future-oriented accounting information
We can expand the information users can access to it. The goal is to provide a future-oriented financial information to help amounted to external information users to assess the financial prospects. Future-oriented accounting information should be reasonable, with a supportive, reflecting the economic situation and plan most likely course of action. Other future-oriented accounting information accounting period covered by the span should not be extended to the outside of the period can not be reasonably estimated. Reasonable period should be the year. This is estimated that the problems caused by the frequent and significant correction can be minimized. Moreover, forecasting length shorter, discounted and problems which led to the choice of discount rate can be avoided. Future-oriented accounting information not only requires disclosure of significant assumptions and recommended for use on the selection of the accounting policies expected future accounting policies used in the preparation of the historical financial statements.
Strengthened to prevent information asymmetry control
The main purpose of the control, in order to protect the interests of those groups information disadvantage. The main method of control is to develop appropriate criteria: minimum disclosure requirements of generally accepted accounting and auditing standards, audit requirements for listed companies. Insider trading rules, for example, it can ensure full disclosure of information in the prospectus. In addition to the protection of retail investors, such controls can also enhance public confidence in the capital markets, and improve the operation of capital markets. Accounting and audit the most important role is to report relevant and reliable information, thereby reducing corporate insiders and public investors and other users of information asymmetry. However, this requires the reliability of the accounting and auditing staff, and with professional competence, after all, the main executor of their guidelines. Must therefore by the relevant laws to regulate the accounting profession, control and ensure the quality of accounting personnel to effectively solve the problem of information asymmetry.

References: ª¤
[1] Fan long Ying, Tian Mengyun, firewood US group. Theory and practice of information symmetry [J]. Shijiazhuang joint technical vocational College academic research, 2007, (01). [2] Fan long tassel, Lee West text. Enterprise introduction of management information systems of a number of ª¤
thinking [J]. Accounting Monthly, 2006, (03).
[3] Wei Ming Hai Gong Kai accounting theory [Dalian: Dongbei University Press, 2003. ª¤
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