Self-Serving Behavior in Managers' Discretionary Information Disclosure Decisions

Posted: 2 Mar 1998

See all articles by Wilbur G. Lewellen

Wilbur G. Lewellen

Purdue University; National Bureau of Economic Research (NBER)

Taewoo Park

University of Maryland

Byung T. Ro

Purdue University - Krannert School of Management

Abstract

Research has shown that managers display self-serving behavior with regard to a variety of discretionary information production decisions. We test here whether such behavior is also manifest in discretionary information disclosure decisions. Our particular focus is on the common stock return performance comparisons now required in corporate proxy statements under the SEC's new executive compensation disclosure regulations. We find evidence which suggests that the industry and peer company stock return benchmarks and the broader market indices chosen by management for those comparisons are downward biased resulting in a pervasive overstatement of the relative performances of the reporting firms. Cross-sectionally the extent of the bias varies systematically with certain key attributes of the reporting firm. Among these are the level of its own performance and the degree of stock ownership by the firm's senior management. We interpret our findings as indicative of self-serving behavior on the part of the firm's management.

JEL Classification: J33

Suggested Citation

Lewellen, Wilbur (BIll) Garrett and Park, Taewoo and Ro, Byung T., Self-Serving Behavior in Managers' Discretionary Information Disclosure Decisions. Available at SSRN: https://ssrn.com/abstract=55505

Wilbur (BIll) Garrett Lewellen (Contact Author)

Purdue University ( email )

West Lafayette, IN 47907-1310
United States
317-494-4397 (Phone)
317-494-9658 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Taewoo Park

University of Maryland ( email )

Robert H. Smith School of Business
College Park, MD 20742
United States
301-405-2217 (Phone)
301-314-9157 (Fax)

Byung T. Ro

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-4512 (Phone)
765-494-9658 (Fax)

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