The effects of agency cost on voluntary disclosure of corporate earnings forecasts

Authors: Ruey-Dang Chang; Chun-Ju Fang; Cheng-Shoung Chu;

Journal: Chia Da Management Review. Dec. 2007, 27(2): 29-53.

Keywords: Agency Theory; Agency Cost; Voluntary Disclosure of Earnings Forecasts

Abstract:
The purpose of the study is to investigate the effects of agency cost on voluntary disclosure of earnings forecasts. The study takes the perspective that in order to win the trust from shareholders and creditors, managers are willing to disclose earnings forecasts voluntarily. Firm size and management’s share holding percentage are adopted to represent the agency cost between managers and shareholders, while leverage represents the agency cost between managers and creditors. Empirical data of 407 listed and OTC companies were obtained from the TEJ data bank in the periord of 1992-2001. The accumulated logistic regression models indicate that the bigger the firm size is, the more willingness of the company is to engage a voluntary disclosure of earnings forecasts and the higher the leverage is, the lower the willingness is to a voluntary disclosure. However, there is no significant relationship between management's share holding percentage and voluntary disclosure of earnings forecasts.