Ding, Kexing. Three essays on CEO career concerns, management forecasts, and regulatory scrutiny on disclosure practices. Retrieved from https://doi.org/doi:10.7282/t3-fvcc-b260
DescriptionThe dissertation consists of three independent and interrelated essays focusing on CEO career concerns, management forecast characteristics, and regulatory scrutiny on disclosure practices.
The first essay argues that CEOs with career concerns may use a forecast precision strategy to highlight or obfuscate information disclosed in management forecasts. This study suggests that new CEOs are more likely to increase forecast precision when the underlying forecast news is more positive and reduce forecast precision when the news is more negative. Further, the findings suggest that CEOs especially use this approach when the career concern problem is more severe and when there are more opportunities for strategic disclosures.
The second essay investigates the changes in firms’ voluntary disclosure of forward-looking information after receiving critical comment letters issued by the Securities and Exchange Commission. The study focuses on revenue recognition comment letters and analyzes several management forecast characteristics. I find that firms tend to issue more management forecasts and supplement earnings forecasts with disaggregated forecasts on other line-items, especially the forecasts for revenue account. I also find that the effect is stronger for negative news forecasts and market reactions to the comment letter release are attenuated if managers provide more frequent and transparent forecasts.
The third essay evaluates the impact of Securities and Exchange Commission disclosure scrutiny on corporate hedging activities. I find that firms’ risk exposures decrease after receiving derivatives-related comment letters, possibly indicating hedging efficiency improvements. Further, derivatives comment letter receiver firms are more likely to stop or reduce derivatives usage during the post-letter period. The study adds to the research that examines how SEC regulatory scrutiny on disclosure practices may influence firms' real behaviors.
The first and the second essays respond to the call by Hirst et al. (2008) to extend research on the management forecast attributes. The first essay is also related to the literature that examines the impact of career concerns on managerial behaviors. The second and third essays add to the comment letter literature. I extend the growing research that examines the efficacy of the SEC comment letter review process and its impact on the information environment.