Managerial ability and financial statement disaggregation decisions
Journal
Journal of Empirical Finance
Journal Volume
74
Pages
101427
Date Issued
2023-12
Author(s)
Abstract
Firms with high-ability management teams disclose more disaggregated information in financial statements than other firms after accounting for endogeneity concerns. Investors deem the disaggregated information disclosed by high-ability managers to be more credible. More disaggregated accounting information reduces stock price crash risk and lowers the cost of equity to a greater extent when provided by high-ability managers. Superior managers’ performance pay is positively related to the level of financial statement disaggregation. These results show that high-ability managers and their firms benefit more from providing granular accounting information.
Subjects
Credibility | Disaggregation | Financial statements | Managerial ability
Publisher
Elsevier B.V.
Type
journal article