Smokescreen: How Managers Behave When They Have Something To Hide

Tanja Artiga González, Markus Schmid, David Yermack

NBER Working Paper No. 18886
Issued in March 2013
NBER Program(s):   CF   LE

We study financial reporting and corporate governance in 218 companies accused of price fixing. These firms engage in evasive financial reporting strategies, including earnings smoothing, segment reclassification, and restatements. In corporate governance, cartel firms favor outside directors likely to monitor inattentively due to low attendance, other board seats, and overseas residence. When directors resign, they are often not replaced, and auditors are rarely switched. Cartel firms have unusually low CEO turnover and rely on internal management promotions. Their managers exercise stock options faster than managers of other firms. Cartel firms are large donors to political candidates. While our results are based only upon firms engaged in price fixing, we expect that they should apply generally to all companies in which managers seek to conceal poor performance or wrongdoing.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


This paper was revised on December 2, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18886

Users who downloaded this paper also downloaded these:
Pan, Wang, and Weisbach w18882 Learning about CEO Ability and Stock Return Volatility
Giglio and Shue w18914 No News is News: Do Markets Underreact to Nothing?
Cook and Kang w18791 Birthdays, Schooling, and Crime: New Evidence on the Dropout-Crime Nexus
Corman, Dave, and Reichman w18887 Effects of Welfare Reform on Women's Crime
Heller, Pollack, Ander, and Ludwig w19014 Preventing Youth Violence and Dropout: A Randomized Field Experiment
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us