Tone of narrative disclosures and earnings management: UK evidence
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作者:
Elshandidy, Tamer
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Ajman Univ, Coll Business Adm, POB 346, Ajman, U Arab Emirates
Helwan Univ, Fac Commerce & Business Adm, Helwan, EgyptAjman Univ, Coll Business Adm, POB 346, Ajman, U Arab Emirates
Elshandidy, Tamer
[1
,2
]
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机构:
Kamel, Hany
[3
]
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[1] Ajman Univ, Coll Business Adm, POB 346, Ajman, U Arab Emirates
[2] Helwan Univ, Fac Commerce & Business Adm, Helwan, Egypt
[3] Qatar Univ, Coll Business & Econ, PO Box 2713, Doha, Qatar
This paper investigates whether a relationship exists between the tone of narrative disclosures and engagement in earnings management activities. Using FTSE all-share nonfinancial firms, our estimates show a significant association between the tone of narrative disclosure (measured by the percentage of positive words, negative words, and net tone) and the prevalence of earnings management. The results also suggest that manipulating firms, which represent extreme cases of earnings management, are more likely to use less negative tone to conceal their fraudulent practices. In contrast, non-manipulating firms tend to use more positive tone to mask their involvement in managing earnings. Additionally, the paper examines the market reaction to both earnings management and the tone of narrative disclosure. The findings reveal that earnings management and net tone are positively associated with abnormal market returns for non-manipulating firms, but have no significant association for manipulating firms. Overall, the paper highlights the important role of the tone of narrative disclosures in providing clarity to the numbers presented in annual reports.
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[1]
ABRAHAMSON E, 1994, ACAD MANAGE J, V37, P1302, DOI 10.5465/256674
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Univ Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USAUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA
Arslan-Ayaydin, Ozgur
Boudt, Kris
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Vrije Univ Brussel, Solvay Business Sch, Pl Laan 2, B-1050 Brussels, Belgium
Vrije Univ Amsterdam, Fac Econ & Business, De Boelelaan 1105, NL-1081 Amsterdam, NetherlandsUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA
Boudt, Kris
Thewissen, James
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Katholieke Univ Leuven, Accounting Finance & Insurance, Korte Nieuwstr 33, B-2000 Antwerp, BelgiumUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA
机构:
Univ Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USAUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA
Arslan-Ayaydin, Ozgur
Boudt, Kris
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Vrije Univ Brussel, Solvay Business Sch, Pl Laan 2, B-1050 Brussels, Belgium
Vrije Univ Amsterdam, Fac Econ & Business, De Boelelaan 1105, NL-1081 Amsterdam, NetherlandsUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA
Boudt, Kris
Thewissen, James
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Katholieke Univ Leuven, Accounting Finance & Insurance, Korte Nieuwstr 33, B-2000 Antwerp, BelgiumUniv Illinois, Dept Finance, S Morgan St 601, Chicago, IL 60607 USA