Smokescreen: How Managers Behave When They Have Something To Hide
AbstractWe study financial reporting and corporate governance in 218 companies accused of price fixing. These firms engage in evasive financial reporting strategies, including earnings smoothing, segment reclassification, and restatements. In corporate governance, cartel firms favor outside directors likely to monitor inattentively due to low attendance, other board seats, and overseas residence. When directors resign, they are often not replaced, and auditors are rarely switched. Cartel firms have unusually low CEO turnover and rely on internal management promotions. Their managers exercise stock options faster than managers of other firms. Cartel firms are large donors to political candidates. While our results are based only upon firms engaged in price fixing, we expect that they should apply generally to all companies in which managers seek to conceal poor performance or wrongdoing.
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Date of creation: Mar 2013
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- Artiga González, Tanja & Schmid, Markus & Yermack, David, 2013. "Smokescreen: How Managers Behave When They Have Something to Hide," Working Papers on Finance, University of St. Gallen, School of Finance 1309, University of St. Gallen, School of Finance.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
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