2017/07/01 by Stephen P. Baginski, John L. Campbell, Lisa A. Hinson +1 · 245 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Psychology · #Accounting #Actuarial science #Affect (linguistics) #Auditing, Earnings Management, Governance #Business #Compensation (psychology) #Corporate Finance and Governance #Dismissal #Economics #Empirical evidence #Ex-ante #Executive compensation #Finance #Financial Markets and Investment Strategies #Labour economics #Law #Payment #Political science #Psychology #Public disclosure #Severance #Social psychology
paper · doi:10.2308/accr-51848
published in The Accounting Review 93(2), 61-95 (American Accounting Association)
openalex publication_date 2017/07/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
ABSTRACT 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. JEL Classifications: M12; M41. Data Availability: Data are available from the public sources cited in the text.