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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
Published by: Pittsburg State University
Stable URL: http://www.jstor.org/stable/40604574
Page Count: 17
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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.
Journal of Managerial Issues © 2007 Pittsburg State University