Are CEOs incentivized to shelter good information?

Hongrui Feng, Yuecheng Jia

Research output: Contribution to journalArticlepeer-review

Abstract

Prior theoretical studies on the agency problem hold different opinions from the empirical literature on two questions: (a) Are CEOs incentivized to shelter good information? (b) Are CEOs incentivized to evenly shelter good and bad information? This paper demonstrates that CEOs with high pay-performance incentives tend to successfully shelter good information rather than bad information. Furthermore, CEOs with high pay-performance incentives shelter good information by using real earnings management and textual manipulation but not accrual-based earnings management. These asymmetric information manipulation behaviors help to decrease corporate cash flow volatility as well as the jump and crash risk on the stock market.

Original languageEnglish (US)
Pages (from-to)109-132
Number of pages24
JournalFinancial Review
Volume56
Issue number1
DOIs
StatePublished - Feb 2021

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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