Search results

1 – 2 of 2
Per page
102050
Citations:
Loading...
Access Restricted. View access options
Article
Publication date: 18 February 2021

Beibei Yan, Özgür Arslan-Ayaydin, James Thewissen and Wouter Torsin

Prior research shows that managers with lower ability release less accurate management earnings forecasts and have more earnings restatements, lower earnings persistence and lower…

823

Abstract

Purpose

Prior research shows that managers with lower ability release less accurate management earnings forecasts and have more earnings restatements, lower earnings persistence and lower quality accruals estimations. Yet, whether the impact of managerial ability (MA) on financial reporting can be extended to the narrative section of firms' financial disclosures needs to be theoretically and empirically examined. The authors theorize in this paper that managers with low ability opportunistically inflate the tone to increase outsiders' perceptions of their ability. The authors also examine the relation between MA and the informativeness of tone to predict future firm performance and explain investors' reaction at earnings announcement.

Design/methodology/approach

The authors collect 24,000 earnings press releases of 1,149 distinct firms between 2004 and 2013. Content analysis is used to proxy the tone of the disclosures. The authors use the score developed by Demerjian et al. (2012) to measure MA. The authors then employ panel data regressions to examine the impact of MA on disclosure tone.

Findings

The authors find that low-ability managers inflate the disclosure tone to positively influence labor market's perceptions about their ability. This effect is magnified for younger and shorter-tenured managers, for firms with more intense monitoring and during bear markets. The authors also find that the tone of earnings press releases of low-ability managers results in a lower stock price reaction. Supplementary analyses show that the results do not only hold for the tone, but also can be extended to other linguistic features such as the numerical intensity and the readability of earnings press releases. The results are robust to alternative library specifications and other corporate disclosures such as CEO letters to shareholders or 10-K filings.

Research limitations/implications

The paper shows that managers worry about how firm performance influences the labor market assessment of their ability. In particular, the authors find that managers of low ability are willing to opportunistically manipulate the content of corporate disclosures to improve this perception and build their reputation.

Originality/value

The authors contribute by providing theoretical and empirical evidence on how managers attempt to steer assessments of their ability by manipulating corporate disclosures. Consistent with prior business research suggesting that one's ability is a key feature that affects managers' propensity to engage in ethical practices, such as tax avoidance or manipulation of financial information, this study shows that less able managers tend to inflate the tone of the earnings announcements and that this ability-driven bias is likely to be magnified by career concerns.

Details

Asian Review of Accounting, vol. 29 no. 2
Type: Research Article
ISSN: 1321-7348

Keywords

Access Restricted. View access options
Article
Publication date: 12 July 2024

Catherine Acosta Garcia, Isabelle Verleyen and Annelies Roggeman

Previous studies on the relationship between corporate social responsibility (CSR) and tax avoidance (TA) have found inconclusive results. Academics have suggested deepening our…

276

Abstract

Purpose

Previous studies on the relationship between corporate social responsibility (CSR) and tax avoidance (TA) have found inconclusive results. Academics have suggested deepening our understanding of this relationship. Although a few studies have responded to this call, research toward moderating variables is still nascent. The purpose of this study is to analyze the moderating role of economic freedom (EF) and its interaction with power distance (PD) on the relationship between CSR and TA.

Design/methodology/approach

Based on a sample of 3,866 publicly listed firms from 44 countries over the period 2010–2018, the authors use multivariate regressions techniques to investigate whether and how EF moderates the relationship between CRS and TA and how PD influences this effect.

Findings

Findings indicate that the potentially positive relationship between CSR and TA is weaker for firms in institutional environments with higher EF. Moreover, we find that this moderating effect is stronger when PD is lower.

Practical implications

This study has important implications. It offers insights for managers to reflect on their CSR and taxation practices, and for policymakers to consider the institutional conditions that facilitate corporations’ social and tax-responsible behavior. These findings indicate the necessity of integrating cultural, regulatory and collaborative elements to observe corporations engaged in social and tax-responsible behavior.

Originality/value

To the best of the authors’ knowledge, this is the first study to investigate the moderating effect of EF on the relationship between CSR and TA, and its interaction with PD. Moreover, our sample includes firms based in Europe, North and South America, Asia and Oceania, facilitating the study of EF and PD’s broad diversity.

Details

Society and Business Review, vol. 19 no. 4
Type: Research Article
ISSN: 1746-5680

Keywords

1 – 2 of 2
Per page
102050