Managers' Pay Duration and Voluntary Disclosures
In this paper we examine the impact of managers’ pay duration on voluntary disclosures. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize that pay duration can incentivize managers to provide more disclosures by better aligning the inte...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2013
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/soa_research/1093 |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | In this paper we examine the impact of managers’ pay duration on voluntary disclosures. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize that pay duration can incentivize managers to provide more disclosures by better aligning the interest of shareholders and managers. Using management earnings forecasts to capture voluntary disclosures, we find that after controlling for the magnitude of stock-based compensation, managers with longer pay duration have a higher tendency to issue earnings forecasts and issue forecasts more frequently. We also document that the impact of pay duration on voluntary disclosure is greater for bad news forecasts than for good news forecasts. Finally, we find that the impact of pay duration is more pronounced among firms with less transparent information environment and firms with lower institutional investors’ ownership, where the marginal effects of additional disclosures are larger. |
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