How do overconfident CEOs respond to regulation fair disclosure? Evidence from financial report readability

Min Bai, Shihe Li, Limin Xu and Yu, Chia-Feng (Jeffrey)

Finance Research Letters, 2022, vol. 50, issue C

Abstract: This paper examines how overconfident CEOs adjust financial report readability (FRR) in response to Regulation Fair Disclosure (RegFD). Our difference-in-differences analysis shows that while being associated with lower readability ex ante, overconfident CEOs increase their firms' FRR relatively to non-overconfident peers after the importance of public disclosure grows due to RegFD adoption. We also find that the relative increase in readability is dependent on the extent of firms' financial constraints and financing through the equity market. Overall, our results suggest that overconfident CEOs fine-tune FRR to reduce the external equity financing cost, especially when selective disclosure and communication are restricted.

Keywords: Financial report readability; Overconfident CEO; Regulation fair disclosure (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s154461232200527x

DOI: 10.1016/j.frl.2022.103349

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