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Executive compensation contracts and voluntary disclosure to security analysts

Executive compensation contracts and voluntary disclosure to security analysts We hypothesize that a CEO’s responsiveness to security analysts’ demands for information about the firm is influenced by the structure of the CEO’s compensation package. Our analysis is based on a sample of 469 CEO presentations to security analyst societies by 149 firms during the period 1984‐1988. Consistent with the argu ments of Nagar (1999; 1998) that CEO shareholdings and golden parachutes reduce the cost to the CEO of disclosing proprietary information, we find that CEO share holdings and the presence of golden parachutes are positively associated with the total amount of information that a CEO discloses at an analyst society presentation. Consistent with the argument that CEOs whose cash compensation is sensitive to firm performance have incentives to release bad news so as to lower expectations about future performance and, hence, bonus targets, CEO cash compensation performance sensitivities are positively associated with the CEO’s willingness to disclose bad news. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Executive compensation contracts and voluntary disclosure to security analysts

Managerial Finance , Volume 31 (7): 24 – Jul 1, 2005

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Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350510769730
Publisher site
See Article on Publisher Site

Abstract

We hypothesize that a CEO’s responsiveness to security analysts’ demands for information about the firm is influenced by the structure of the CEO’s compensation package. Our analysis is based on a sample of 469 CEO presentations to security analyst societies by 149 firms during the period 1984‐1988. Consistent with the argu ments of Nagar (1999; 1998) that CEO shareholdings and golden parachutes reduce the cost to the CEO of disclosing proprietary information, we find that CEO share holdings and the presence of golden parachutes are positively associated with the total amount of information that a CEO discloses at an analyst society presentation. Consistent with the argument that CEOs whose cash compensation is sensitive to firm performance have incentives to release bad news so as to lower expectations about future performance and, hence, bonus targets, CEO cash compensation performance sensitivities are positively associated with the CEO’s willingness to disclose bad news.

Journal

Managerial FinanceEmerald Publishing

Published: Jul 1, 2005

Keywords: Security analysts; Compensation

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