Speaking of the Short-Term: Disclosure Horizon and Managerial Myopia

Francois  Brochet; Maria  Loumioti; George  Serafeim

Article | Review of Accounting Studies | September 2015

Speaking of the Short-Term: Disclosure Horizon and Managerial Myopia

by Francois Brochet, Maria Loumioti and George Serafeim

Abstract

We study conference calls as a voluntary disclosure channel and create a proxy for the time horizon that senior executives emphasize in their communications. We find that our measure of disclosure time horizon is associated with capital market pressures and executives' short-term monetary incentives. Consistent with the language emphasized during conference calls partially capturing short-termism, we show that our proxy is associated with earnings and real activities management. Overall, the results show that the time horizon of conference call narratives can be informative about managers' myopic behavior.

Keywords: Short-termism; management styles; disclosure; conference calls; Investing; earnings management; Motivation and Incentives; Management Style; Forms of Communication;

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Brochet, Francois, Maria Loumioti, and George Serafeim. "Speaking of the Short-Term: Disclosure Horizon and Managerial Myopia." Review of Accounting Studies 20, no. 3 (September 2015): 1122–1163.

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Aperture Investors is a startup investment firm that seeks to disrupt the asset management industry through competitive differentiation by charging investors primarily when its portfolio managers outperform the marketplace. Headed by Wall Street veteran Peter Kraus and backed with substantial and patient seed capital, Aperture seeks to attract both star portfolio managers and assets from mutual funds and hedge funds. Kraus believes that his innovative business model addresses the current dysfunctional fee and incentive structures in the industry, which have led to long-term market underperformance, and that Aperture will address the reasons that are motivating investors to shift to cheaper, passively-managed index and exchange-traded funds.

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Speaking of the Short-Term: Disclosure Horizon and Managerial Myopia

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