Detailansicht

Information asymmetry and conflicts of interests between shareholders and managers harm the efficient allocation of capital in the economy. Financial reporting and disclosure, information intermediaries, and executive compensation are instruments helping to mitigate these capital market frictions. In this thesis, I examine three questions regarding the design of these instruments. First, I investigate whether the informational complexity of financial disclosure is associated with the perceived trustworthiness of managers. Specifically, I analyze how the readability of annual reports is associated with companies' stock market returns during times in which being trustworthy is of higher and lower importance. I find that companies with less readable reports experience lower market stock returns when overall levels of trust decline, indicating that managers are perceived as less trustworthy when disclosing financial documents of higher informational complexity. Second, I examine whether trust in companies and in the media affects how investors react to earnings announcements. I present evidence that investors react more strongly in countries where people trust companies and distrust the media. This suggests that investors shift their attention between information disclosed by companies and information created by the media depending on how much they trust these sources. Third, I investigate the development of executive compensation in Germany. To facilitate more international research on an area that is dominated by evidence for U.S. companies, I build a database and revisit important empirical results. Overall, my thesis contributes to the understanding of financial disclosure, information intermediaries, and executive compensation. Especially the trust of investors becomes an important asset for managers in light of the increasing focus on corporate social responsibility.

In this thesis, I examine three questions regarding the design of financial reporting and disclosure, information intermediaries, and executive compensation to mitigate capital market frictions.