Management Reputation and Voluntary Disclosures
Speaker
Abstract
| This paper studies how a manager’s reputation influences disclosure decisions the manager makes over time. Managers differ from each other in terms of their innate willingness to disclose private information they receive about their firm’s value. Because shareholders cannot identify which managers are more or less forthcoming, managers have incentives to develop a reputation for being forthcoming by disclosing the information they receive. Capital market participants revise their assessments of a manager’s reputation based on the manager’s observed pattern of voluntary disclosures. The paper shows that a manager’s reputation for being forthcoming influences the manager’s current choice among disclosure policies in two ways, first because his reputation affects how investors interpret his current (lack of) disclosure, a static reputation effect, and second, because his current disclosure affects investors’ assessment of his reputation in the future, a dynamic reputation effect. |
| Contact information: |
| Paolo Perego |
