Relative performance evaluation and strategic peer-harming disclosures

Bloomfield, Matthew J., Heinle, Mirko and Timmermans, Oscar ORCID: 0000-0003-2220-0057 (2024) Relative performance evaluation and strategic peer-harming disclosures. Journal of Accounting Research, 62 (3). 877 - 933. ISSN 0021-8456

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Abstract

Many firms use relative stock performance to evaluate and incentivize their CEOs. We document that such firms routinely disclose information that harms their peers' stock prices, and sometimes explicitly mention the harmed peers, by name, in these disclosures. Consistent with deliberate sabotage, peer-harming disclosures appear to be aimed at peers whose stock price depressions are most likely to benefit the disclosing firms' CEOs. The pricing effect of these disclosures does not reverse, suggesting that the disclosures contain legitimate information regarding peers' prospects. In sum, our results suggest that relative performance evaluation in CEO pay motivates CEOs to internalize the externalities of their disclosures, and strategically disclose information that harms peers' stock prices, in order to improve their firms' relative standing within their peer group.

Item Type:	Article
Official URL:	https://onlinelibrary.wiley.com/journal/1475679x
Additional Information:	© 2024 The Authors
Divisions:	Accounting
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Date Deposited:	27 Mar 2024 13:00
Last Modified:	20 Dec 2024 00:53
URI:	http://eprints.lse.ac.uk/id/eprint/122509

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