Faculty Publications

Stakeholder Value: A Convenient Excuse for Underperforming Managers?

Document Type

Article

Keywords

earnings transcripts, governance, Stakeholder value

Journal/Book/Conference Title

Journal of Financial and Quantitative Analysis

Abstract

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.

Department

Department of Finance

Original Publication Date

1-1-2023

DOI of published version

10.1017/S0022109023001308

Link to Full Text

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