The failure of managers to release bad news is a version of the adverse selection problem. Such
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a. Why might a manager withhold bad news?
b. When will the disclosure principle operate to motivate the manager to report bad news? Under what conditions is the disclosure principle subject to failure?
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a Managers may withhold bad news To conceal evidence of shirking if the bad news results from low manager effort To delay a fall in share price which ...View the full answer
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