The U.S. governance structure, built on periodic disclosure of performance data and stock price maximization, encourages risk taking because managers feel compelled to meet shareholder expectations at every reporting interval.
Source quote, verbatim
Risk taking in this context may be encour- aged by the perceived need to satisfy expectations of shareholders. Managers feel compelled to fulfill performance expectations whenev- er results are disclosed, be it quarterly, bi-annually, or annually.
From
Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010), III. Cultural Components of Risk Taking and Controlling Risk, p. 21 https://ssrn.com/abstract=1558614 · source PDF
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Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614
Holds when
governance systems that emphasize periodic performance disclosure and stock price
extended_bykaal:claim:2922176-008 Increasing shareholder control over executives can be actively counterproductive: it further incentivizes the ...
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