Taking Credit and Avoiding Responsibility: The Causes and Career Consequences of Managers’ Strategic Disclosures

This paper provides evidence on the determinants and career consequences of managers’ strategic causal explanations (attributions) for firm performance. Using new textual analysis algorithms, I identify abnormal attributions and find that managers appear to strategically attribute favorable firm performance to internal factors and poor firm performance to external factors. More importantly, I find that strategic external attributions of poor performance are associated with lower CEO cash-compensation sensitivity and forced turnover likelihood. These findings suggest that managers’ career-related incentives affect their disclosure choices. I also find that abnormal attributions are mitigated by greater analyst following, better corporate governance and greater peer performance commonality. Overall, the evidence is consistent with managers strategically presenting causal explanations to extract private benefits.