Research on the Impact of Institutional Investor Exit Threats on Management Tone Manipulation
DOI:
https://doi.org/10.54097/158cgx80Keywords:
Institutional investor exit threats, Management tone manipulation, Management Discussion and Analysis, Textual information disclosure, Corporate governance.Abstract
With the continuous development of China's capital market, textual information in annual reports has increasingly become an important channel for investors to understand a firm's development prospects. As the most valuable part of textual information disclosure in annual reports, the Management Discussion and Analysis (MD&A) section, owing to its high subjectivity, provides room for management to manipulate tone. Using Chinese A-share listed firms on the Shanghai and Shenzhen stock exchanges from 2007 to 2024 as the research sample, this paper examines the impact of institutional investor exit threats on management tone manipulation. The results show that institutional investor exit threats significantly curb management tone manipulation, and this conclusion still holds after robustness tests including the replacement of the dependent variable, the instrumental variable method, propensity score matching, and the Heckman two-stage model. Mechanism tests indicate that exit threats inhibit tone manipulation by constraining managers' self-serving behavior and improving corporate information transparency. Further analysis reveals that the governance effect of exit threats is stronger in state-owned enterprises, in firms located in regions with a lower degree of marketization, and in firms with lower Type II agency costs, and that exit threats can enhance firm value by curbing tone manipulation. This paper extends the research on the governance effect of exit threats and on management tone manipulation, and provides implications for regulators, listed firms, and investors.
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