Measurement of Managerial Discretion Based on the Public Annual Reports: Evidence from Chinese Listed Firms

The paper constructs a measurement indices system of managerial discretion based on the data of public reports of Chinese listed firms, and confirms its validity by adopting the data of selected 400 Chinese listed firms during 2002-2004. The classical ERIC questionnaire measures managerial discretion directly from CEOs and the other top managers by 63 items, while the paper divides managerial discretion into resource operation power, structural position power and expert prestige power, and then measures them by adopting the data of public report. The two methods have the similar results, and this method has the advantage of lower cost, and easily carried out.