{"id":156658,"date":"2026-03-14T18:02:19","date_gmt":"2026-03-14T17:02:19","guid":{"rendered":"https:\/\/www.startupbusiness.it\/the-paradox-of-transparency-why-we-are-slow-to-deliver-bad-news\/156658\/"},"modified":"2026-03-14T18:06:27","modified_gmt":"2026-03-14T17:06:27","slug":"the-paradox-of-transparency-why-we-are-slow-to-deliver-bad-news","status":"publish","type":"post","link":"https:\/\/www.startupbusiness.it\/en\/the-paradox-of-transparency-why-we-are-slow-to-deliver-bad-news\/156658\/","title":{"rendered":"The paradox of transparency: why we are slow to deliver bad news"},"content":{"rendered":"\n<p>In capital markets, timing is everything. The speed with which a firm recognises losses and write-downs has a direct impact on valuations, credit spreads, investor confidence and the cost of capital. Accounting literature has shown that the timely recognition of losses strengthens market discipline and reduces downward shocks (Mora &amp; Walker, 2015; Ruch &amp; Taylor, 2015).  <\/p>\n\n<p>Yet recent evidence suggests that even high-performing managers tend to delay reporting negative developments (Mukherjee et al., 2026).<\/p>\n\n<p>This finding appears counterintuitive. High-calibre managers generate superior operating results (Demerjian et al., 2012), produce more accurate earnings estimates (Baik et al., 2011) and maintain high levels of earnings quality (Demerjian et al., 2013). Over time, they build reputational capital and trust in the market. Traditional governance logic would suggest that high performance is associated with greater transparency.   <\/p>\n\n<p>The evidence, however, suggests a more complex situation.<\/p>\n\n<h2 class=\"wp-block-heading\"><strong>Performance and discretion: a structural relationship<\/strong><\/h2>\n\n<p>The explanation does not necessarily lie in opportunistic behaviour, but in a structural effect. Sustained performance boosts investor confidence, and confidence increases managerial discretion (Demerjian et al., 2012). Such discretion includes leeway in the timing of recognising impairment and other adverse information.  <\/p>\n\n<p>Mukherjee, Wang and Okur (2026) report that it is precisely the most credible managers who enjoy greater freedom in deciding when to disclose negative information. Reputational capital acts as a buffer that reduces immediate market pressure. <\/p>\n\n<p>This mechanism highlights an important distinction: the quality of earnings and the speed of disclosure do not necessarily go hand in hand.<\/p>\n\n<h2 class=\"wp-block-heading\"><strong>Economic incentives and volatility<\/strong><\/h2>\n\n<p>The remuneration structure reinforces this trend. Executive pay is often linked to reported profits and share price performance. The early recognition of losses increases accounting volatility and can reduce the variable component of remuneration, even when long-term economic fundamentals remain sound (Ruch &amp; Taylor, 2015).  <\/p>\n\n<p>Research on accounting conservatism shows that the timeliness of loss recognition depends on the alignment of incentives, not just on technical standards (Mora &amp; Walker, 2015). If the system rewards stability and penalises volatility, deferring negative information becomes a rational choice. <\/p>\n\n<h2 class=\"wp-block-heading\"><strong>Behavioural factors and information latency<\/strong><\/h2>\n\n<p>In addition to these structural factors, there are behavioural factors. Experimental studies show that people tend to share good news first and delay sharing bad news, even when the recipients would prefer the reverse order (Legg &amp; Sweeny, 2014). <\/p>\n\n<p>When psychological preferences, managerial discretion and financial incentives come together, delaying the communication of bad news can become an integral part of organisational practice.<\/p>\n\n<p>The risk is not an immediate distortion, but the build-up of latent issues. Negative information does not disappear; it becomes compressed over time. In favourable macroeconomic conditions, this compression may remain invisible. During periods of tight liquidity or sectoral volatility, these deferred write-downs can emerge all at once, amplifying price adjustments and eroding confidence.   <\/p>\n\n<h2 class=\"wp-block-heading\"><strong>Implications for investors and boards of directors<\/strong><\/h2>\n\n<p>This trend is probabilistic, not universal. Not all high-performing managers delay disclosure, and in some contexts, the sequential nature of information can preserve strategic flexibility. However, the evidence suggests a structural predisposition towards delay among top-performing leaders (Mukherjee et al., 2026).  <\/p>\n\n<p>For institutional investors, the timing of disclosures should be treated as an independent analytical variable. The clustering of impairment losses, delays in recognising write-downs, and the sequence of disclosures in relation to macroeconomic or sectoral turning points may signal a build-up of latent risk. <\/p>\n\n<p>For boards of directors, the distinction between aggregate performance and information symmetry becomes crucial. A company may report high-quality profits whilst, at the same time, exhibiting temporal asymmetries in the reporting of losses. Incorporating metrics on the timeliness of disclosure into internal control systems enhances resilience.  <\/p>\n\n<p>The analysis of remuneration structures also takes on strategic importance. Schemes that are heavily weighted towards short-term results may increase the likelihood of negative information being withheld (Ruch &amp; Taylor, 2015). Aligning incentives with transparency requirements becomes a key governance tool.  <\/p>\n\n<h2 class=\"wp-block-heading\"><strong>The paradox of competence<\/strong><\/h2>\n\n<p>The paradox of disclosure does not suggest that high-performing leaders are less trustworthy. Rather, it indicates that competence operates within systems of incentives and expectations that prioritise stability and control over the narrative. <\/p>\n\n<p>In the financial markets, deferred risk is not eliminated; it accumulates. When it surfaces, it tends to do so in a concentrated manner, with amplified effects on valuations and the cost of capital. <\/p>\n\n<p>The challenge for investors and boards is not to replace trust with suspicion, but to complement performance with information symmetry. Only when operational soundness and disclosure discipline evolve hand in hand can the ability to absorb shocks without sudden repricing be strengthened. (photo by <a href=\"https:\/\/unsplash.com\/it\/@iamromankraft?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\">Roman Kraft <\/a>on <a href=\"https:\/\/unsplash.com\/it\/foto\/man-sitting-on-bench-reading-newspaper-_Zua2hyvTBk?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\">Unsplash<\/a>)  <\/p>\n\n<h2 class=\"wp-block-heading\"><strong><em>References<\/em><\/strong><\/h2>\n\n<p><em>Baik, B., Farber, D. B., &amp; Lee, S. (2011). CEO ability and management earnings forecasts. Contemporary Accounting Research, 28(5), 1645\u20131668.<br\/>Demerjian, P. R., Lev, B., &amp; McVay, S. (2012). Quantifying managerial ability. Management Science, 58(7), 1229\u20131248.<br\/>Demerjian, P. R., Lev, B., Lewis, M. F., &amp; McVay, S. E. (2013). Managerial ability and earnings quality. The Accounting Review, 88(2), 463\u2013498.<br\/>Legg, A. M., &amp; Sweeny, K. (2014). News order preferences. Personality and Social Psychology Bulletin, 40(3), 279\u2013288.<br\/>Mora, A., &amp; Walker, M. (2015). Accounting conservatism. Accounting and Business Research, 45(5), 620\u2013650.<br\/>Mukherjee, S., Wang, S., &amp; Okur, M. R. (2026). Why even the best managers are slow to report bad news. Columbia Law School Blue Sky Blog.<br\/>Ruch, G. W., &amp; Taylor, G. (2015). Accounting conservatism. Journal of Accounting Literature, 34, 17\u201338.              <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Even the most capable managers tend to delay reporting any negative developments in the company\u2019s accounts<\/p>\n","protected":false},"author":125,"featured_media":156656,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1346],"tags":[1385,1331,2005],"companies":[],"journalist":[3234],"class_list":["post-156658","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-must-read","tag-companies","tag-innovation-en","tag-management-en","journalist-martino-agostini-en"],"featured_sizes_urls":{"thumbnail":{"src":"https:\/\/www.startupbusiness.it\/wp-content\/uploads\/2026\/03\/roman-kraft-_Zua2hyvTBk-unsplash.webp","width":150,"height":100,"crop":false,"srcset":false,"alt":"cattive notizie"},"large":{"src":"https:\/\/www.startupbusiness.it\/wp-content\/uploads\/2026\/03\/roman-kraft-_Zua2hyvTBk-unsplash.webp","width":1024,"height":683,"crop":false,"srcset":false,"alt":"cattive notizie"},"2048x2048":{"src":"https:\/\/www.startupbusiness.it\/wp-content\/uploads\/2026\/03\/roman-kraft-_Zua2hyvTBk-unsplash.webp","width":1280,"height":854,"crop":false,"srcset":false,"alt":"cattive notizie"}},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Paradosso della trasparenza, perch\u00e9 si tarda a dare le cattive notizie<\/title>\n<meta name=\"description\" content=\"Even the most capable managers tend to delay reporting any negative developments in the company\u2019s accounts\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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Co-fondatore di Designtech, l\u2019hub di innovazione che avvicina il mondo del design con quello della tecnologia. Advisor di Austrian Business Agency, Emil Banca, Fondazione Symbola, Fondazione Quadrans. Partecipa regolarmente a incontri, convegni, conferenze dedicate all\u2019ecosistema dell\u2019innovazione. E\u2019 stato co-organizzatore degli Italian Innovation Day and Series che si sono svolti dal dal 2016 al 2020 nelle citt\u00e0 di Tokyo in Giappone, Melbourne, Adelaide, Perth, Canberra in Australia e Singapore e co-organizzatore dell\u2019Italy India Innovation Day di AIICP 2021 e 2022. Ha curato il volume \u2018L\u2019innovazione che non ti aspetti. Contesti e visioni per l\u2019impresa\u2019 , l\u2019edizione italiana di \u2018La startup digitale, guida pratica step by step\u2019 e ha scritto la prefazione all\u2019edizione italiana de \u2018La quarta era\u2019 di Byron Reese, ed \u00e8 co-autore di \u2018Cosa e Dove: strategie digitali di ricerca del lavoro\u2019, tutti editi da FrancoAngeli. 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Co-fondatore di Designtech, l\u2019hub di innovazione che avvicina il mondo del design con quello della tecnologia. Advisor di Austrian Business Agency, Emil Banca, Fondazione Symbola, Fondazione Quadrans. Partecipa regolarmente a incontri, convegni, conferenze dedicate all\u2019ecosistema dell\u2019innovazione. E\u2019 stato co-organizzatore degli Italian Innovation Day and Series che si sono svolti dal dal 2016 al 2020 nelle citt\u00e0 di Tokyo in Giappone, Melbourne, Adelaide, Perth, Canberra in Australia e Singapore e co-organizzatore dell\u2019Italy India Innovation Day di AIICP 2021 e 2022. Ha curato il volume \u2018L\u2019innovazione che non ti aspetti. Contesti e visioni per l\u2019impresa\u2019 , l\u2019edizione italiana di \u2018La startup digitale, guida pratica step by step\u2019 e ha scritto la prefazione all\u2019edizione italiana de \u2018La quarta era\u2019 di Byron Reese, ed \u00e8 co-autore di \u2018Cosa e Dove: strategie digitali di ricerca del lavoro\u2019, tutti editi da FrancoAngeli. In passato \u00e8 stato curatore di StartupDigest Italy, coordinatore scientifico del Forum per la Ricerca della Provincia Autonoma di Trento, board member di TechChill Milano advisor di di ScaleIT , ha collaborato con Il Sole 24 Ore \u00e8 stato direttore di Innov\u2019azione, bimestrale edito da Apsti, ha collaborato con Corriere Innovazione ed \u00e8 stato presidente del comitato di selezione del Premio Marzotto e advisor di Cetif-Universit\u00e0 Cattolica Milano.","sameAs":["https:\/\/www.abirascid.com\/","https:\/\/www.linkedin.com\/in\/emilabirascid","https:\/\/x.com\/emilabirascid"],"url":"https:\/\/www.startupbusiness.it\/en\/author\/emil-abirascid\/"}]}},"author_name":"Emil Abirascid","categories_names":["Must Read"],"_links":{"self":[{"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/posts\/156658","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/users\/125"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/comments?post=156658"}],"version-history":[{"count":1,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/posts\/156658\/revisions"}],"predecessor-version":[{"id":156659,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/posts\/156658\/revisions\/156659"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/media\/156656"}],"wp:attachment":[{"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/media?parent=156658"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/categories?post=156658"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/tags?post=156658"},{"taxonomy":"companies","embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/companies?post=156658"},{"taxonomy":"journalist","embeddable":true,"href":"https:\/\/www.startupbusiness.it\/en\/wp-json\/wp\/v2\/journalist?post=156658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}