Voluntary Disclosure, Moral Hazard, and Default Risk

• 成果类型: Article; Early Access
• 署名作者: Fu, Shiming; Trigilia, Giulio
• 署名单位: Shanghai University of Finance & Economics; University of Rochester
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4860
• 发表日期: 2023
• 关键词: voluntary disclosure; default risk; dynamic moral hazard; Funding liquidity; earnings guidance; loss firms; non-GAAP reporting

摘要

We study a dynamic moral hazard setting where the manager has private evi-dence that predicts the firm's cash flows. Bad-news disclosure is rewarded by a lower bor-rowing cost relative to the no-evidence case, whereas no disclosure leads to higher borrowing costs. For a given capital structure, disclosure reduces the firm's default risk by lowering its pay-for-performance sensitivity. However, for a set of low-profitability firms, the anticipation of future disclosure of information by managers lowers both firm value , managerial rents at the financing stage because of a reduction in the firm's initial liquidity. The model can reconcile the empirical evidence on the effects of providing earn-ings guidance, especially for loss firms.