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Managerial incentives for attracting attention

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  • María Gutiérrez
  • Nino Papiashvili
  • Josep A. Tribó
  • Antonio B. Vazquez

Abstract

This paper studies the mechanisms which motivate managers to engage in cheap talk and attract the market's attention in a credible way. We consider stock split announcements, voluntary earnings forecasts, and press releases issued by firms to the media as proxies for managerial cheap talk. We show that: (a) managerial performance‐related pay contracts incentivize executives to attract attention; (b) analysts increase their coverage of firms following cheap talk; and (c) chief executive officers are punished for attracting attention when market prices do not increase following cheap talk. The results are stronger for firms which are most in need of attention.

Suggested Citation

  • María Gutiérrez & Nino Papiashvili & Josep A. Tribó & Antonio B. Vazquez, 2020. "Managerial incentives for attracting attention," European Financial Management, European Financial Management Association, vol. 26(4), pages 896-937, September.
    • Handle: RePEc:bla:eufman:v:26:y:2020:i:4:p:896-937
    DOI: 10.1111/eufm.12248
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