Given the adverse effect on their welfare, managers are reluctant to disclose bad news in a timely fashion. We examine the effect of managers’ pay duration on firms’ voluntary disclosures of bad news. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize and find that pay durations can incentivize managers to provide more bad news earnings forecasts. This result holds after controlling for the endogeneity of pay duration. In addition, we find that the effect of pay duration is more pronounced for firms with weaker governance and with poorer information environments, where the marginal benefits of additional disclosures are higher. We also find that these effects are stronger for firms facing lower litigation risk and for firms operating in more homogenous industries, where managers’ ex-ante incentives to disclose bad news are particularly weak. Overall, we contribute to the literature by providing evidence that lengthening the vesting period of managers’ compensation can induce managers to be more forthcoming with bad news.

中文翻译：

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经理的薪酬期限和自愿披露

鉴于对其福利的不利影响，管理者不愿及时披露坏消息。我们研究了经理的薪酬期限对公司自愿披露坏消息的影响。薪酬期限是指经理人的年度薪酬归属所需的平均期限。我们假设并发现支付期限可以激励经理提供更多坏消息的盈利预测。该结果在控制了工资期限的内生性后成立。此外，我们发现薪酬期限的影响对于治理较弱和信息环境较差的公司更为明显，这些公司额外披露的边际收益更高。我们还发现，对于面临较低诉讼风险的公司和在更同质行业中经营的公司，这些影响更大披露坏消息的事前激励特别弱。总的来说，我们通过提供证据表明延长经理薪酬的归属期可以促使经理更乐于接受坏消息，从而为文献做出贡献。