Does managerial ability affect disclosure? Evidence from earnings press releases

Beibei Yan, Özgür Arslan-Ayaydin, James Thewissen and Wouter Torsin
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James Thewissen: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021006, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: Using a sample of about 24,000 earnings press releases by S&P1500 firms between 2004 and 2013, we find that low-ability managers inflate the disclosure tone to positively influence labor market's perceptions about their ability. This effect is magnified for younger and shorter-tenured managers, for firms with more intense monitoring and during bear markets. We also show that the tone of earnings press releases of low-ability managers is less informative to predict future firm performance and results in a lower stock price reaction. Overall, our findings confirm that managerial ability affects the credibility of qualitative information.

Keywords: Managerial ability; Tone management; Tone informativeness; Career concerns; Earnings press releases (search for similar items in EconPapers)
JEL-codes: G14 G17 J50 J53 M40 (search for similar items in EconPapers)
Date: 2021-01-01
Note: In: Asian Review of Accounting, 2021, vol. 29(2), p. 192-226
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Journal Article: Does managerial ability affect disclosure? Evidence from earnings press releases (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2021006

DOI: 10.1108/ARA-03-2020-0036

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