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The research focuses on the influence that managers have on the timing of the revelation of bad news, which can be used to downsize and restructure poorly performing firms. More broadly, high-level managers have a major impact on the potential for economy-wide capital reallocation and restructuring. In theory, there should be a high level of capital reallocation during an economic downturn, with assets being shifted from bad managers to good managers. This is because the differences between well and poorly performing firms are larger in recessions. Also in theory, there are strong incentives for corporate takeovers during bad economic times, since stronger firms can buy the assets of weaker firms at a lower cost. Yet these theoretical likelihoods do not hold true.
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