Cover Image

Financial reporting quality and the quiet Life by Mihir N. Mehta.

Bertrand and Mullainathan (2003) find that managers shielded from the threat of takeovers exert less effort to maximize firm value, consistent with a 'quiet life' hypothesis. I study whether the governance role of financial reporting can mitigate adverse effects arising from managerial preferences for a quiet life. I hypothesize and find evidence that after changes in the mid 1990's to Delaware's takeover protection regime, Delaware firms with higher financial reporting quality (FRQ) have better operating performance and higher capital investment intensity. Furthermore, the above relation between FRQ and performance is stronger for firms operating in less competitive industries, and firms with staggered boards. Overall, the results suggest that financial reporting can help mitigate adverse effects associated with managerial preferences for a quiet life.
Year of publication:
2010
Authors: Mehta, Mihir N.
Other Persons: S.P. Kothari and Joseph P. Weber. (contributor)
Institutions: Sloan School of Management (contributor)
Publisher: Massachusetts Institute of Technology
Subject: Sloan School of Management
Full text |
Type of publication: Book / Working Paper
Type of publication (narrower categories): Thesis
Language: English
Source:
BASE
Similar items by subject
Similar items by person