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Employment Capital, Board Control, and the Problem of Misleading Disclosures

William J. Donoher and Richard Reed
Journal of Managerial Issues
Vol. 19, No. 3 (Fall 2007), pp. 362-378
Stable URL: http://www.jstor.org/stable/40604574
Page Count: 17
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Employment Capital, Board Control, and the Problem of Misleading Disclosures
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Abstract

Accounting and disclosure scandals unfortunately have become part of the business landscape in recent years. We investigate potential antecedents of this phenomenon by developing a framework examining the effects of employment capital and board control on the likelihood of misleading disclosures. Our findings show that executives of high-return firms seem motivated to protect their employment capital by issuing misleading disclosures to give the appearance of continuing high performance. We also identify structural antecedents rooted in the power of the CEO and the board, with CEO equity ownership bearing a U-shaped relationship with the issuance of misleading disclosures and board tenure exerting a moderating influence that appears to be effective primarily in high-return firms. We conclude by discussing the implications of these findings and offering directions for future research.

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