Publication Type
Working Paper
Publication Date
5-2015
Abstract
In this paper, we examine the effect of managers’ pay duration on firms’ voluntary disclosures. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize and find that pay duration can incentivize managers to provide more bad news earnings forecasts. This result holds after controlling for the level of stock-based compensation and the endogeneity of pay duration. In addition, we find that the effect of pay duration is more pronounced for firms with weaker governance and for firms with a more opaque information environment, where the marginal benefits of additional disclosures are higher. Our additional analyses indicate that managers with a longer pay duration issue more accurate earnings forecasts. Overall, our paper contributes to the literature by documenting that lengthening the vesting periods of managers’ compensation can induce managers to be more forthcoming with bad news.
Keywords
Voluntary disclosures, management forecasts, executive compensation, pay duration
Discipline
Accounting
Research Areas
Corporate Governance, Auditing and Risk Management
First Page
1
Last Page
50
Publisher
SMU School of Accountancy Research Paper Series, Paper 2015-28
City or Country
Singapore
Citation
CHENG, Qiang; CHO, Young Jun; and KIM, Jae Bum.
Managers' pay duration and voluntary disclosures. (2015). 1-50.
Available at: https://ink.library.smu.edu.sg/soa_research/1674
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://ssrn.com/abstract=2372814