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Hidden Gems: Do market participants respond to performance expectations revealed in compensation disclosures?
Journal of Accounting and Economics ( IF 7.293 ) Pub Date : 2022-06-30 , DOI: 10.1016/j.jacceco.2022.101519
C Edward Fee , Zhi Li , Qiyuan Peng

We find that a new compensation disclosure item on expected payouts from performance-based stock grants reveals unique information regarding future firm performance. Extracting inferred performance expectations from the disclosures, we find that firms disclosing the highest expected grant payout significantly outperform in ROA, Q, sales growth, and profit margin over the next two years, while those disclosing the lowest expected payout underperform. The embedded information is not captured by other information channels, such as managerial earnings guidance, 10-K sentiment, insider selling activities, unexplained CEO pay, and analyst forecasts. Investors and analysts do not fully incorporate the information and are later surprised around earnings announcement days. A portfolio that buys firms with the highest performance expectation and shorts firms with the lowest expectation earns significantly positive abnormal returns. Our findings suggest that the enhanced compensation disclosure contains valuable information, but investors underreact to information that is difficult to collect and process.



中文翻译:

隐藏的宝石:市场参与者是否对薪酬披露中揭示的业绩预期做出反应?

我们发现,基于绩效的股票授予的预期支出的新薪酬披露项目揭示了有关未来公司绩效的独特信息。从披露中提取推断的业绩预期,我们发现披露最高预期拨款支出的公司在未来两年的 ROA、Q、销售增长和利润率方面显着优于大盘,而那些披露最低预期拨款的公司表现不佳。其他信息渠道无法捕获嵌入式信息,例如管理层收益指引、10-K 情绪、内幕销售活动、不明原因的 CEO 薪酬和分析师预测。投资者和分析师没有完全纳入这些信息,随后在收益公布日前后感到惊讶。买入业绩预期最高的公司并做空业绩预期最低的公司的投资组合可获得显着正的异常收益。我们的研究结果表明,增强的薪酬披露包含有价值的信息,但投资者对难以收集和处理的信息反应不足。

更新日期:2022-06-30
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