When Myopic Managers Must Mark to Market

• 成果类型: Article
• 署名作者: Kolasinski, Adam; Yang, Nan
• 署名单位: Texas A&M University System; Texas A&M University College Station; Mays Business School; Hong Kong Polytechnic University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.03249
• 发表日期: 2024
• 页码: 6234-6254
• 关键词: Financial crises; banking; bank liquidity provision; ceo incentives; CEO pay duration; capital regulation; real earnings management; other-than-temporary impairments; Fair value accounting

摘要

Although prior research suggests strict, fair value-based securities accounting rules cause banks to sell securities into negative liquidity shocks, a value-destroying behavior called liquidity feedback trading, the mechanism is uncertain. We find the sooner chief executive officers (CEOs) are permitted to cash out of their stock and option grants, the more prone are their banks to feedback trading. Furthermore, the sooner CEOs can cash out, the more positive their banks' stock price reaction to news of accounting rule relaxation. We conclude incentives for managerial short-term focus are a mechanism by which stricter accounting rules cause feedback trading. We also find evidence that regulatory compliance concerns play a role.