Self-serving disclosures by chairpersons of failing UK companies
نویسنده
چکیده
This paper investigates information disclosures made by the chairpersons of boards of directors in 120 failing UK companies. There are four main findings. Firstly, chairpersons excessively blame poor performance on exogenous factors rather than managerial decisions. Secondly, almost half of chairpersons do not candidly disclose problems that are apparent when they write their statements. Thirdly, prospective disclosures are more optimistic than disclosures about past performance despite significantly worse performance after the chairpersons' statements. Finally, chairpersons' compensation is negatively associated with bad news disclosures. Overall, the results indicate that chairpersons in failing companies hide bad news, and they have incentives to do so. ©City University of Hong Kong. JEL Classifications: M41 and G33
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