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

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