Self-serving behavior in managers' discretionary information disclosure decisions

Self-serving behavior in managers' discretionary information disclosure decisions Research has shown that managers display self-serving behavior in a variety of discretionary information production decisions. We test whether such behavior is also manifest in discretionary information disclosure decisions — in particular, in the common stock return performance comparisons now required in corporate proxy statements. We find evidence that the industry and peer-company stock return benchmarks, and broader market indices, chosen by management for those comparisons are downward biased, thereby overstating relative reporting-firm performance. Cross-sectionally, the extent of the bias varies with key reporting-firm attributes, including firm performance and the character of firm ownership structure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Self-serving behavior in managers' discretionary information disclosure decisions

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Publisher
Elsevier
Copyright
Copyright © 1996 Elsevier Ltd
ISSN
0165-4101
DOI
10.1016/0165-4101(95)00417-3
Publisher site
See Article on Publisher Site

Abstract

Research has shown that managers display self-serving behavior in a variety of discretionary information production decisions. We test whether such behavior is also manifest in discretionary information disclosure decisions — in particular, in the common stock return performance comparisons now required in corporate proxy statements. We find evidence that the industry and peer-company stock return benchmarks, and broader market indices, chosen by management for those comparisons are downward biased, thereby overstating relative reporting-firm performance. Cross-sectionally, the extent of the bias varies with key reporting-firm attributes, including firm performance and the character of firm ownership structure.

Journal

Journal of Accounting and EconomicsElsevier

Published: Apr 1, 1996

References

  • Optimal managerial contracts and equilibrium security prices
    Diamond, D.W.; Verrecchia, R.E.
  • Additional evidence on bonus plans and income management
    Gaver, J.J.; Gaver, K.M.; Austin, J.R.
  • Annual bonus schemes and the manipulation of earnings
    Holthausen, R.W.; Larcker, D.F.; Sloan, R.G.
  • Executive compensation structure, ownership, and firm performance
    Mehran, H.

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