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dc.contributor.advisorZardkoohi, Asghar
dc.creatorChakrabarty, Subrata 1979-
dc.date.accessioned2015-10-29T18:47:54Z
dc.date.available2015-10-29T18:47:54Z
dc.date.created2009-08
dc.date.issued2009-06-24
dc.date.submittedAugust 2009
dc.identifier.urihttp://hdl.handle.net/1969.1/155365
dc.description.abstractTop executives sometimes attempt to create information asymmetry through corporate reporting manipulation. In the United States, one method was not to report financials in certain quarters (this was a legal option before 1970), and a second method is to report inaccurate financials (which has been a major concern in the 1990s-2000s). This study argues that when cognitive bias of loss aversion is high, a firm?s risk can induce such attempts to create information asymmetry. This argument is based on prospect theory's loss aversion axiom, which states that people psychologically weigh losses more strongly than equivalent gains. In this study, a firm's risk is theoretically operationalized using independent variables of firm-specific risk (firm's unsystematic risk as assessed by stock market) and default risk (difficulty the firm faces in meeting its debt market obligations). Correspondingly, loss aversion is theoretically operationalized using moderator variables of institutional ownership concentration (as an indicator of shareholder resistance to loss aversion) and top executive in-the-money stock options to salary ratio (as an indicator of personal wealth that is exposed to loss if a firm approaches bankruptcy). Hypotheses are tested using data collected for a 6 year period from 1964 to 1969 and for a 9 year period from 1997 to 2006. Findings suggest that when cognitive bias of loss aversion is high, firm-specific risk in stock market and default risk in debt market may cause top executives to be fearful of reporting bad news, tempting them to create information asymmetry as a result. An implication is that the encouragement of risk (as recommended by agency theory) without factoring in the role of loss aversion (as highlighted by prospect theory's loss aversion axiom) can be counterproductive.
dc.format.mimetypeapplication/pdf
dc.subjectCompensation
dc.subjectQuarterly reporting
dc.subjectAnnual reporting
dc.subjectInaccurate reporting
dc.subjectSarbanes Oxley
dc.subjectScandals
dc.subjectFraudulent reporting
dc.subjectFraud
dc.subjectManipulation
dc.subjectCEO turnover
dc.subjectsuccession
dc.subjectEconomic crisis
dc.subjectFinancial crisis
dc.subjectCredit crisis
dc.subjectEvent study
dc.subjectOLS regression
dc.subjectTobin regression
dc.subjectTobit regression
dc.subjectLogistic regression
dc.subjectMatched sampling
dc.subjectInteraction
dc.subjectDisordinal
dc.subjectCrossover
dc.subjectStrategy
dc.subjectStrategic management
dc.subjectManagement
dc.subjectCompetitive advantage
dc.subjectCorporate governance
dc.subjectLeadership
dc.subjectEthics
dc.subjectReporting
dc.subjectRestatements
dc.subjectAgency theory
dc.subjectProspect theory
dc.subjectInstitutional theory
dc.subjectInformation Asymmetry
dc.subjectMoral hazard
dc.subjectAdverse selection
dc.subjectLoss aversion
dc.subjectRisk
dc.subjectFirm specific risk
dc.subjectUnsystematic risk
dc.subjectDefault risk
dc.subjectBankruptcy risk
dc.subjectCredit
dc.subjectCreditors
dc.subjectDebt
dc.subjectDebtors
dc.subjectTop Management
dc.subjectTop executive
dc.subjectCEO
dc.subjectOwnership
dc.subjectInstitutional ownership
dc.subjectInstitutional ownership concentration
dc.subjectInstitutional regulations
dc.subjectPublic policy
dc.subjectStock options
dc.subjectIn the money
dc.titleFear of Reporting Bad News: Why Risk and Loss Aversion Can Tempt Top Executives to Create Information Asymmetry
dc.typeThesis
thesis.degree.departmentManagement
thesis.degree.disciplineManagement
thesis.degree.grantorTexas A & M University
thesis.degree.nameDoctor of Philosophy
thesis.degree.levelDoctoral
dc.contributor.committeeMemberHitt, Michael A
dc.contributor.committeeMemberIreland, R D
dc.contributor.committeeMemberPaetzold, Ramona L
dc.contributor.committeeMemberFraser, Donald R
dc.type.materialtext
dc.date.updated2015-10-29T18:47:54Z


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