Abstract:
How does career concerns influence managers' information disclosure decisions is a hot issue in finance research. Using a sample of Chinese A-share listed companies during the period of 1999-2014, this paper investigates how CEOs withhold firms' bad news during their tenure and the possible methods of bad news hoarding. Our results show that: CEOs hide more bad news in early years of their tenure and a year before their departure. This effect is more pronounced in non-SOEs. CEOs take “big bath” and expose bad news hidden by last CEO in their first year of tenure. In addition, earnings management is a channel through which CEOs hide bad news. Further analysis shows that only non-family CEOs in family firms have career concerns to withhold bad news. Overall, our study reveals the dynamic change of firms' information disclosure policy during CEOs' tenure. This paper has important implications on how to restrict CEOs' information disclosure management and reduce stock price crash risk.
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