Are CEOs incentivized to shelter good information?. Issue 1 (18th August 2020)

• Record Type: Journal Article
• Authors: Feng, Hongrui; Jia, Yuecheng
• Is Part Of: Financial review. Volume 56:Issue 1(2021)
• Page Start: 109
• Page End: 132
• Publication Date: 2020-08-18
• Subjects: CEO Delta incentive -- good information manipulation -- real earnings management -- textual manipulation; Finance -- United States -- Periodicals; Finance -- Periodicals; 332
• DOI: 10.1111/fire.12249
• Languages: English
• ISSNs: 0732-8516

Abstract

Abstract: Prior theoretical studies on the agency problem hold different opinions from the empirical literature on two questions: (a) Are CEOs incentivized to shelter good information? (b) Are CEOs incentivized to evenly shelter good and bad information? This paper demonstrates that CEOs with high pay‐performance incentives tend to successfully shelter good information rather than bad information. Furthermore, CEOs with high pay‐performance incentives shelter good information by using real earnings management and textual manipulation but not accrual‐based earnings management. These asymmetric information manipulation behaviors help to decrease corporate cash flow volatility as well as the jump and crash risk on the stock market.