Do Career Concerns Affect the Delay of Bad News Disclosure?

• 成果类型: Article
• 署名作者: Baginski, Stephen P.; Campbell, John L.; Hinson, Lisa A.; Koo, David S.
• 署名单位: University System of Georgia; University of Georgia; State University System of Florida; University of Florida; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51848
• 发表日期: 2018
• 页码: 61-95
• 关键词: MANAGEMENT EARNINGS FORECASTS; STOCK OPTION AWARDS; executive-compensation; golden parachutes; LITIGATION RISK; severance pay; CONTRACTS; INFORMATION; INVESTMENT; AGREEMENTS

摘要

Theory argues that career concerns (i.e., concerns about the impact of current performance on contemporaneous and future compensation) encourage managers to withhold bad news disclosure. However, empirical evidence regarding the extent to which a manager's career concerns are associated with a delay in bad news disclosure is limited. Across multiple proxies for career concerns, we find that the extent to which managers delay bad news is positively associated with their level of career concerns. Then, we hand-collect data on a compensation contract that firms use to reduce CEOs' career concerns (i.e., ex ante severance pay agreements). We find that if managers receive a sufficiently large payment in the event of dismissal, they no longer delay the disclosure of bad news. Overall, our findings support prior theoretical evidence that managers delay bad news disclosure due to career concerns and suggest a mechanism through which firms can mitigate the delay.