Discretionary Disclosure and Stock-Based Incentives

Posted: 17 Sep 2002

See all articles by Venky Nagar

Venky Nagar

University of Michigan, Stephen M. Ross School of Business

Dhananjay Nanda

University of Miami - Department of Accounting

Peter D. Wysocki

Boston University Questrom School of Business

Abstract

We examine the relation between managers' disclosure activities and their stock price-based incentives. Managers are privy to information that investors demand and are reluctant to publicly disseminate it unless provided appropriate incentives. We argue that stock price-based incentives in the form of stock-based compensation and share ownership mitigate this disclosure agency problem. Consistent with this prediction, we find that firms' disclosures, measured both by management earnings forecast frequency and analysts' subjective ratings of disclosure practice, are positively related to the proportion of CEO compensation affected by stock price and the value of shares held by the CEO.

Keywords: compensation, disclosure

JEL Classification: G29, G34, J33, M41, M45

Suggested Citation

Nagar, Venky and Nanda, Dhananjay and Wysocki, Peter D., Discretionary Disclosure and Stock-Based Incentives. Journal of Accounting and Economics, Vol. 34, No. 1-3, pp. 283-309, January 2003. Available at SSRN: https://ssrn.com/abstract=310520

Venky Nagar (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)

Dhananjay Nanda

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

Peter D. Wysocki

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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