Do Competent Managers Hoard Bad News? Self-regulation Theory and Korean Evidence

This study investigates the relationship between managerial ability and opportunistic behavior, especially hoarding negative information. Borrowing self-regulation resource theory, we expect that competent managers may have fewer self-regulation resources and are more likely to engage in bad news hoarding because they are exposed to chronic stress to prove their ability by satisfying a high goal. The empirical result supports our anticipation. Furthermore, we also find that a talented manager's opportunistic behavior varies by a firm's earnings persistence and information environment. Our findings provide a more direct link between managerial ability and unethical behavior and extend the line of studies documenting the potential dark side of managerial ability.