Managerial reporting, overoptimism, and litigation risk

• 成果类型: Article
• 署名作者: Laux, Volker; Stocken, Phillip C.
• 署名单位: Dartmouth College; University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2012.02.001
• 发表日期: 2012
• 关键词: shareholder litigation; earnings management; disclosure; overconfidence; INFORMATION; environment; forecasts; MARKETS; REFORM

摘要

We examine how the threat of litigation affects an entrepreneur's reporting behavior when the entrepreneur (i) can misrepresent his privately observed information, (ii) pays legal damages out of his own pocket, and (iii) is optimistic about the firm's prospects relative to investors. We find higher expected legal penalties imposed on the culpable entrepreneur do not always cause the entrepreneur to be more cautious but instead can increase misreporting. We highlight how this relation depends crucially on the extent of entrepreneurial overoptimism, legal frictions, and the internal control environment. (c) 2012 Elsevier B.V. All rights reserved.