Relative performance evaluation and strategic peer-harming disclosures

Matthew J. Bloomfield, Mirko Heinle and Oscar Timmermans

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Many firms use relative stock performance to evaluate and incentivize their CEOs. We document that such firms routinely disclose information that harms their peers' stock prices, and sometimes explicitly mention the harmed peers, by name, in these disclosures. Consistent with deliberate sabotage, peer-harming disclosures appear to be aimed at peers whose stock price depressions are most likely to benefit the disclosing firms' CEOs. The pricing effect of these disclosures does not reverse, suggesting that the disclosures contain legitimate information regarding peers' prospects. In sum, our results suggest that relative performance evaluation in CEO pay motivates CEOs to internalize the externalities of their disclosures, and strategically disclose information that harms peers' stock prices, in order to improve their firms' relative standing within their peer group.

Keywords: relative performance evaluation; peer-harming actions; voluntary disclosure; sabotage; stock returns; capital markets (search for similar items in EconPapers)
JEL-codes: G12 G14 J33 M41 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2024-06-01
New Economics Papers: this item is included in nep-acc, nep-hrm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Accounting Research, 1, June, 2024, 62(3), pp. 877 - 933. ISSN: 0021-8456

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:122509

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