Abstract
Asymmetric information is a fundamental friction that results in mismatches and efficiency losses in the labor market. In this study, we posit that more disaggregated financial disclosure by a CEO candidate's prior employer can help the hiring firm better assess the possible fit between its operational needs and the candidate's skill set. Using a mandatory segment reporting reform in the United States (SFAS 131) as an exogenous shock to disclosure disaggregation, we find a significant increase in the firm-CEO match quality when the hiring firm has access to more disaggregated segment information about the external candidate's past employment. Furthermore, the improvement in firm-CEO matching is greater when segment information is incrementally more useful for evaluation of candidate skills. These findings reveal a novel labor market benefit of disaggregated financial disclosure: alleviating pre-hiring information deficiencies and facilitating efficient allocation of CEO talent across firms.
Original language | English (US) |
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Pages (from-to) | 1726-1757 |
Number of pages | 32 |
Journal | Contemporary Accounting Research |
Volume | 39 |
Issue number | 3 |
DOIs | |
State | Published - Sep 1 2022 |
Keywords
- CEO hiring
- asymmetric information
- disclosure disaggregation
- executive labor market
- labor market frictions
- matching
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics