Journal of Accounting and Economics Vol. 10 No. 1 1988
Managerial competition, information costs, and corporate governance
Abstract
This paper reports evidence that dissident stockholders who wage a proxy contest for board seats typically site poor earnings rather than poor stock price performance as necessitating the proposed hostile management change. Consistent with this finding, sample firms' pre-contest accounting returns are systematically below-market, whereas their pre-contest stock returns are not. During an election campaign, incumbent managers apparently exercise their accounting discretion to paint a favorable picture of their own performance to voting stockholders. If elected, dissidents tend to take an immediate earnings ‘bath’ which they typically blame on the poor decisions of prior management.
- DOI
- 10.1016/0165-4101(88)90021-3
- Volume
- 10
- Issue
- 1
- Pages
- 3-36
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref