Tone Management and Litigation Concerns in CEOs' Early Years.
Although over‐optimistic disclosures have been found to increase the likelihood of shareholder litigation, this finding has been largely ignored in the context of newly appointed CEOs' disclosure choices. Addressing this gap, our study examines the variation in CEOs' tone management strategies in th...
| Publicado en: | Abacus Vol. 61; no. 2; pp. 462 - 498 |
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| Autores principales: | , , |
| Formato: | Artículo |
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Wiley-Blackwell
Jun2025
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=hlh&AN=185659967&site=ehost-live header: @attributes: shortDbName: hlh uiTerm: 185659967 longDbName: Humanities International Complete uiTag: AN controlInfo: bkinfo: jinfo: jid: 00013072 AUB jtl: Abacus issn: 00013072 maglogo: Y pubinfo: dt: Jun2025 vid: 61 iid: 2 pid: 480 pub: Wiley-Blackwell artinfo: ui: 185659967 10.1111/abac.12337 ppf: 462 ppct: 36 formats: fmt: – @attributes: type: T – @attributes: type: P size: 404KB tig: atl: Tone Management and Litigation Concerns in CEOs' Early Years. aug: au: Goel, Pratik Madadian, Oveis Torsin, Wouter affil: IESEG School of Management, 3 rue de la Digue, 59000, Lille, France IESEG School of Management, 3 rue de la Digue, 59000 Lille, France, LEM‐CNRS UMR 9221, 3 rue de la Digue, 59000, Lille, France HEC Management School, University of Liège, Rue Louvrex, 14, 4000, Liège, Belgium su: Earnings management Chief executive officers Legal liability Information asymmetry Capital market Sentiment analysis Communication strategies sug: subj: Earnings management Chief executive officers Legal liability Information asymmetry Capital market Sentiment analysis Communication strategies keyword: CEO tenure Information environment Litigation concerns Qualitative disclosures Tone management ab: Although over‐optimistic disclosures have been found to increase the likelihood of shareholder litigation, this finding has been largely ignored in the context of newly appointed CEOs' disclosure choices. Addressing this gap, our study examines the variation in CEOs' tone management strategies in their early years of tenure, here as stimulated by their ex ante litigation concerns (in addition to the well‐documented career concerns). Based on a textual analysis of the 10‐K filings of US nonfinancial firms during 1993–2022, we use the abnormal tone of earnings‐related disclosures to measure strategic tone—a linguistic tool used by managers to influence the perceptions of capital market participants. We find that high litigation concerns are, on average, associated with a greater downward tone management (or over‐pessimism) in CEOs' early years, even after controlling for the 'big bath' phenomenon, as well as a tendency to manage earnings upward on account of career concerns. Furthermore, this over‐pessimism is found to be uninformative about future earnings or operating cash flow. This suggests that managers employ this over‐pessimistic strategy in response to their high litigation risk exposure rather than to inform market participants about their firms' prospects. Finally, we document that a rich firm information environment—which renders low information asymmetry between firms and outside stakeholders (thus attenuating CEOs' information advantage)—dampens new CEOs' tendency to adopt this particular disclosure strategy. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: Y custom: Copyright of Abacus is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. item: Abacus holder: Wiley-Blackwell dt: @attributes: year: 2025 holdings: @attributes: islocal: N |
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