? The solution of information asymmetry and agency problem leads to a very important topic in corporate finance in China, namely corporate governance. Doing a good job in corporate governance is actually the only way to help our enterprise maximize its value. How do we solve the problem of information asymmetry in corporate governance? Next, we learn how to solve the problem of information asymmetry through three parts. What is "adverse selection"? What kind of signal is more reliable? How can enterprises send effective signals?
? First of all, let's look at what is the problem of adverse selection. It's simple, because it happened in advance. I will study the problem that happened later, that is, moral hazard. Speaking of adverse selection, it was actually first put forward by an American economist named george akerlof, who published a very important article in 1970. In this article, he is actually considering a used car market. There are three used cars for sale in this used car market. They are all BMW cars. For the buyer, you don't really know the real performance of these three second-hand BMW cars, but the seller has this information. If one of these three cars is well maintained, just like a new car, we call it a superior car, assuming the value is 1 10,000; There is also a kind of car that is generally maintained. We call it a mid-level car, worth 500 thousand. There is also a car that is very poorly maintained. We call it an inferior car, worth 300 thousand. As a buyer, you can't tell the difference between these three cars, because they are all beautifully painted and look exactly the same, so can you. Only the seller knows their true value. As the party with less information, that is, you, how much are you willing to pay? You may only be willing to pay an average price, right? 100,50,30 The average price is 900,000. When you bid 900 thousand, the owner of a premium car won't want to sell it. He won't want to sell this car with a value of 1 10,000, and finally only get back 900,000, and he will quit the market. Then there are only mid-level cars and inferior cars left on the market. When you know that there is only a mid-level car and an inferior car left in the market, you may adjust your bid again and come up with an average price. The average price of 500,000 yuan and 300,000 yuan is 400,000 yuan. When you bid 400 thousand, the waiting car quit again, right? That owner is definitely not willing to sell it. So there are only inferior cars worth 300 thousand in the market, which is a typical adverse selection problem. This is the first time that akerlof put forward the problem of adverse selection in 1970, so he won the Nobel Prize in Economics in 200 1 year.
? Let me look at the application in finance. For example, when companies issue stocks, there is also information asymmetry. We investors actually don't know what this enterprise will look like in the future, and internal executives can tell it. If we have two types of companies, one is a company that will develop well in the future, and the other may not perform so well. As investors, we have no way to distinguish. At this time, both companies will issue shares. One company's stock can be worth one share in 50 yuan, while another company's stock is worth only one share in 30 yuan. But as investors, we can't tell the difference, so we are only willing to average out 40 yuan. A good company will not sell shares after seeing our bid, so only the worst company is left in the market, which is also a typical adverse selection problem.
? So in a word, what is adverse selection? Adverse selection is due to information asymmetry, which leads to high-quality people or high-quality enterprises withdrawing from this market. You can roughly understand the process that we often say that bad money drives out good money. What impact will so much information asymmetry and adverse selection bring? The most direct consequence is that transactions cannot be conducted in the market and the market cannot play an effective role.
? Adverse selection can be seen everywhere in our lives. How can we solve the problem of adverse selection or information asymmetry? In fact, in real life, we basically have two methods. In the second stage, in this part, one of the most important methods is signal transmission theory. Next class, we will learn another method together, which is called mechanism design theory.
? What kind of signal is more reliable? What is signal transmission theory? Signal transmission theory, its logic is that we have two parties, one with information and the other without information. The party with information may send a signal by doing something, telling the party without private information his true level or his true quality.
? For signal theory, it has two very important conditions: the first condition is that we must have information asymmetry, and those who have more information will act first to transmit this signal; The second condition is that the signal must be sent to some of them at a lower cost than others, so that the signal can be credible.
? For example, when we go to the zoo, we will see peacocks. Male peacocks will drag their long tails and be complacent when courting. In fact, this is very unfavorable to it in nature, because you know that it is difficult to escape the pursuit of natural enemies with such a long tail in the natural wild environment. But why does it still have such a long tail? In fact, this male peacock is sending a signal to tell this female peacock that I can survive with such a long tail, which shows that my genes are good and I am strong. Marry me and stay with me. This is a typical signal transmission theory.
? How can enterprises send effective signals? There is a lot of information asymmetry in corporate governance. Executives may know information that outsiders don't, and there may be information asymmetry between internal investors and external investors. So how do corporate executives solve this information asymmetry problem? He can tell the external investors of the enterprise that he is a manager who works hard for the enterprise and will not sacrifice the interests of shareholders for his own self-interest. What are the ways for enterprises to transmit signals? Summarize two most common and practical methods: one is that corporate executives take the initiative to reduce their salaries; The second is the voluntary information disclosure of enterprises.
? We will see CEOs of many companies take the initiative to reduce their salaries. For example, on March 5, 20 19, the CEO of a domestic company announced that I had taken the initiative to reduce my salary. I reduced my annual salary to 80,000 RMB, less than 7,000 RMB per month. What is the purpose of his doing this action? Actually, I want to tell the outside world that I want to work hard for the enterprise. In fact, this voluntary salary reduction can be traced back to 1979. At that time, Chrysler, one of the three major American automobile companies, was in a very bad situation and was heavily in debt. Its president took the initiative to reduce his salary to one dollar.
? Let's analyze why corporate executives send this signal through salary cuts. In fact, as you know, for an enterprise executive, his salary is only a part of his salary. He also has other things, such as stocks and stock options, which more represent the future income of the enterprise. So when the CEO of a company takes the initiative to reduce his salary, what is the signal he actually sends to the market? But he is very confident about the future of this enterprise, and he is more dependent on the future income of the enterprise. His stock and his options give him a higher reward instead of relying on the company's current cash. Therefore, the executives of enterprises take the initiative to reduce their salaries, and he sends a very positive and very good signal, because for those good executives, the cost of this signal is lower, and the logic is because he can make money through stocks and stock options.
? The second common way of signaling in corporate governance is information disclosure. We know that a company will disclose its information to the public every quarter after it goes public. In particular, China has recently set up a science and technology innovation board to try out the registration system. One of the most important logics of the registration system is that your enterprise should disclose the information of the enterprise in a true, accurate, complete and timely manner. You need to disclose all aspects of the information of the enterprise and expose the enterprise to regulators, news media and investors. Therefore, there is no way for executives of enterprises to do things that covet profits and harm the interests of shareholders. A company is willing to go public and expose itself to the eyes of many regulators. In fact, it is sending a signal to tell investors that I am a good enterprise and I will not harm your interests. Especially after listing, we know that many companies voluntarily disclose more information than the mandatory disclosure required by the CSRC.
? On the other hand, if I am not a good company, can I imitate those good companies and send a signal to the market through false disclosure? I tell you, this is impossible, because once you make a false disclosure and are found out, the punishment is very severe and the consequences are unimaginable. Let's look at an example: the famous Enron incident at the beginning of this century is a good lesson. Enron is an oil company, and its financial fraud is serious, including Andersen, the audit company that did this, and it colluded with it to forge in partnership, so that its share price soared to more than 100. But then its financial fraud was exposed, which led to Enron's bankruptcy, dozens of people were investigated for criminal responsibility, and even Andersen closed down, so it turned out to be the top five accounting firms and finally became the top four accounting firms.
Summary: In the imperfect world, there is a widespread problem of information asymmetry or adverse selection, which is also the number one problem to be solved in our corporate governance. So how to solve the problem of information asymmetry? Signal theory is a very important method, that is, one side with information superiority sends a signal to the other side with information inferiority. To be credible, this signal must meet two conditions: the first condition is that this signal must have a cost; The second condition is the cost of transmitting this signal. For those high-quality enterprises, those high-quality talents, the cost of this signal is lower than those with relatively inferior enterprises or people with low ability, so this signal will be more credible.