Federal ID: 91-6001537
ISSN: 0022-1090 (Print) | 1756-6916 (Online)
Ryan Flugum and Matthew E. Souther
♦ Firms falling short of earnings expectations are more likely to cite stakeholder-focused objectives in their public communications following earnings announcements. This behavior is consistent with managers preferring to be evaluated by subjective stakeholder-based performance criteria when falling short on objective shareholder-based measures. This increased use of stakeholder language is most evident among firms narrowly missing earnings estimates and appears unrelated to a firm’s actual ESG-related activity. Stakeholder language appears to influence the evaluation of CEOs; turnover-performance sensitivity is lower for managers citing stakeholder value. Collectively, our findings are consistent with concerns that stakeholder objectives reduce managerial accountability for poor performance.
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