Some companies are limited to only publish the information and legal requirements, while others choose to voluntarily disclose the information. As part of the contractual theory of the firm, the choice of voluntary publication due to lower agency costs between shareholders and managers. Recall that agency costs are divided into cost control, cost of clearance and residual losses. Agency theory assumes that the costs of customs and monitoring increase with the fraction held by the public.
To reduce the problems of conflicting interests, the interests and good management have to choose a policy of transparent, efficient and permanent. In particular, the news program’s aim is to meet legal and regulatory obligations to inform the shareholders on the company’s situation and create a special relationship with the environment.
This communication policy has become the most effective tool for retention and uptake of shareholders. It aims to reduce the information gap between the power of management and financial power and limit potential opportunistic behavior of managers.
The large separation between shareholders and managers creates an important need for information. This need decreases with greater confidence of the shareholders to the strategies of leaders: the leader voluntarily disseminates relevant information to the public to show its good management, thereby reducing the costs of customs clearance. Similarly, monitoring costs borne by the shareholders are mitigated, if the shareholders would be encouraged by a policy of voluntary disclosure that meets their information needs. Subsequently, the agency costs decrease due to a relationship of trust of the shareholder who is better informed. The latter supports the development of the company by monitoring and evaluation of these projects and is possibly a support in case of difficulty.
The intrusion of a shareholder can significantly change the structure of capital ownership and upset, and the relationship between shareholders and managers, so managers are always encouraged to communicate well, and are also the reason explaining that the stability of the shareholders is the constant concern of those responsible for large corporate groups. Similarly, in cases of poor performance, another reason pushing managers to disclose private information to the public is related to the risk of change, thus maximizing the value of the company.
The major hypothesis of this section is that a policy of regular communication intended for small carriers satisfy their need for information and that this policy, in turn, reduces problems of asymmetric information.
The point raised by this part is the fact that retention reduces the problems of conflict of interest between managers and shareholders as it is treated as an incentive mechanism and discipline from both sides of the contractual relationship. The assumptions detailed above are combined in the model presented in Figure 1. Following this theoretical framework and the development of the game assumptions, we develop the empirical part of this research.
Figure 1. Loyalty- Agency problems