Shooting the Messenger: Quarterly Earnings and Short-term Pressure to Perform from Knowledge@Wharton

Knowledge@Wharton (Jul 21 2010) CEO Leadership

Categories:
Areas of Interest: Career Management, CEO Leadership, Entrepreneurship, Ethics, Women CEOs

Quotes

  1. “ Last year, every earnings announcement was a record loss. People understood that because it was a really bad time. Companies wouldn't necessarily want to come out with a record loss this year because people are expecting to see some improvement and expectations will be ratcheting up somewhat. ”
    By Brian Bushee
  2. “ Neither one of these approaches will deliver sustained shareholder value. You have to do both. ”
  3. “ That's why we observe that managers don't manage earnings as much through [accounting] as through real actions, meaning cutting R&D or cutting maintenance. ”
    By Shivaram Rajgopal
  4. “ When you think about it, it's not the fact that you have to give the information, it's more the fact that [managers] are under pressure to keep the stock price high because that's linked with their compensation. ”
    By Karthik Balakrishnan
  5. “ But Rajgopal argues that firms that have stopped issuing guidance might be motivated by other concerns. According to a 2010 study he co-authored, firms were more likely to commit to a policy of non-disclosure if managers were more certain that they would have bad news to report in the future. Those firms also tended to have a larger percentage of long-term investors. ”
    By Shivaram Rajgopal
  6. “ Although some have suggested that a switch to the European model of corporate governance, which focuses on a broader set of stakeholders, would end such practices as cuts to staff or R&D for the sake of earnings and stock price, Rajgopal emphasizes that this approach is not necessarily better. ”

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