Workshop Series: David Yermack
We study financial reporting and corporate governance in 216 U.S. companies accused of price fixing by antitrust authorities. We document a range of strategies used by these firms when reporting financial results, including frequent earnings smoothing, segment reclassification, and restatements. In corporate governance, cartel firms favor outside directors who are likely to be inattentive monitors due to their status as foreign or "busy". When directors resign, they are often not replaced, and new auditors are rarely engaged. Cartel managers exercise their stock options faster than managers of other firms. While our results are based only upon firms engaged in price fixing, we expect that they should apply generally to all companies in which managers seek to conceal poor performance or personal wrongdoing.
David L. Yermack is the Albert Fingerhut Professor of Finance and Business Transformation at New York University Stern School of Business. Professor Yermack teaches courses in corporate finance, restructuring firms and industries, and law and finance. He has been with NYU Stern since 1994. His primary research areas include boards of directors, executive compensation, executive stock options, and law and finance. David has published in many journals including Journal of Financial Economics, Journal of Finance, and Journal of Law, Economics, and Organizations. He received his Bachelor of Arts in economics, Master of Business Administration, Jurist Doctor degree, Master of Arts in business economics, and Doctor of Philosophy in business economics from Harvard University. See http://www.stern.nyu.edu/faculty/bio/david-yermack.