earticle

영어

We examine the relation between CEO reputation and corporate opacity. CEOs with high reputations have incentives to protect their reputations by enhancing their firms’ information environment, thereby decreasing opacity. However, highly reputed CEOs can become distracted as a result of their notoriety and resort to rentseeking behavior (e.g., earnings management), thereby increasing opacity. Using multiple proxies for CEO reputation and an opacity index comprised of commonly used proxies for information asymmetry, we find that firms with highly reputed CEOs are associated with lower opacity, suggesting that CEOs act to protect their reputations by increasing the flow of information to the market. Results are robust to a changes specification. We also show that CEO reputation matters most when firms have relatively weak governance environments. We also examine this issue from an investor perspective and find that firm value is increasing in CEO reputation, suggesting that investors perceive that highly reputed CEOs improve the information environment. Overall, our paper provides empirical evidence on the economic consequences associated with CEO characteristics.