Abstract
We show that managers with greater options vega undertake riskier firm policies and issue less readable corporate disclosures (Form 10-Ks). Ceteris paribus, a manager in the top quartile of vega files a Form 10-K that is 18.56% percent more voluminous than that of a bottom quartile vega manager. The effect of vega on disclosure obfuscation remains after controlling for firm risk, operating complexities and accounting choices, but is moderated by higher institutional ownership and greater shareholder rights, suggesting strategic disclosure obfuscation. These findings uncover a new (and unintended) link between incentive compatible compensation contracts and disclosure complexity.
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