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Disclosure Quality and Management Trading Incentives

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  • JONATHAN L. ROGERS
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    Abstract

    ABSTRACT This study examines whether managers strategically alter disclosure "quality" in response to personal incentives, specifically those derived from trading on their own account. Using changes in market liquidity to proxy for disclosure quality, I find that trading incentives are associated with disclosure quality choices. Tests are performed across three disclosure samples: management forecasts, conference calls, and press releases. Consistent with a desire to reduce the probability of litigation, I find evidence that managers provide "higher quality" disclosures before selling shares than they provide in the absence of trading. Consistent with a desire to maintain their information advantage, I find some, albeit weaker, evidence that managers provide "lower quality" disclosures prior to purchasing shares than they provide in the absence of trading. Copyright (c), University of Chicago on behalf of the Institute of Professional Accounting, 2008.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Accounting Research.

    Volume (Year): 46 (2008)
    Issue (Month): 5 (December)
    Pages: 1265-1296

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    Handle: RePEc:bla:joares:v:46:y:2008:i:5:p:1265-1296

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    Cited by:
    1. Fei Leng & Kevin Zhao, 2014. "Insider trading around open-market share repurchases," Journal of Economics and Finance, Springer, vol. 38(3), pages 461-491, July.
    2. Rogers, Jonathan L. & Van Buskirk, Andrew, 2009. "Shareholder litigation and changes in disclosure behavior," Journal of Accounting and Economics, Elsevier, vol. 47(1-2), pages 136-156, March.
    3. Rogers, Jonathan L. & Skinner, Douglas J. & Van Buskirk, Andrew, 2009. "Earnings guidance and market uncertainty," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 90-109, October.
    4. Skaife, Hollis A. & Veenman, David & Wangerin, Daniel, 2013. "Internal control over financial reporting and managerial rent extraction: Evidence from the profitability of insider trading," Journal of Accounting and Economics, Elsevier, vol. 55(1), pages 91-110.
    5. Ball, Ray & Jayaraman, Sudarshan & Shivakumar, Lakshmanan, 2012. "Audited financial reporting and voluntary disclosure as complements: A test of the Confirmation Hypothesis," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 136-166.
    6. Rogers, Jonathan L. & Van Buskirk, Andrew, 2013. "Bundled forecasts in empirical accounting research," Journal of Accounting and Economics, Elsevier, vol. 55(1), pages 43-65.

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