Graphical Reporting in Italian Annual Reports during the Financial Crisis: Impression Management or Incremental Information?

2015 ◽  
pp. 77-106 ◽  
Author(s):  
Simone Aresu
Keyword(s):  
Financial Crisis ◽  
Impression Management ◽  
Financial Reporting ◽  
Voluntary Disclosure ◽  
Global Financial Crisis ◽  
Practical Implication ◽  
Theoretical Implication ◽  
Annual Reports ◽  
Management Tools ◽  
Firm Level

This paper investigates whether, before and during the global financial crisis, Italian firms have used financial key performance indicators graphs in the annual reports as impression management tools, to portray a more favourable picture of the firm's performance than is warranted. This study shows that, during the financial crisis, firms have increased the number of graphs and decreased favourable distortions, although graphs continued to be designed inaccurately. The findings could reflect an increased public scrutiny on the firm's performance, during the financial crisis. As a theoretical implication, this paper contributes to the existent financial reporting literature by showing that graphs are not necessarily used in line with an agency theory-based impression management, which is the dominant perspective to explain the graphs' usage in the annual reports during periods of performance upturn. Moreover, it shows that the institutional context can affect voluntary disclosure practices at a firm-level. As a practical implication, this study suggests to annual reports' readers not to necessarily consider managers as self-serving preparers in their graphical reporting strategies. The study also suggests accounting associations, audit firms and other regulatory bodies to create a set of guidelines for a correct graph's use and design.

scholarly journals Impression Management and Retrospective Sense-Making in Corporate Annual Reports: Banks’ Graphical Reporting During the Global Financial Crisis

2017 ◽  
Vol 57 (4) ◽  
pp. 474-496 ◽  
Author(s):  
Michael John Jones ◽  
Andrea Melis ◽  
Silvia Gaia ◽  
Simone Aresu
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Impression Management ◽  
Cognitive Biases ◽  
Global Financial Crisis ◽  
Market Performance ◽  
Annual Reports ◽  
Sense Making ◽  
Stock Market Performance ◽  
The Global Financial Crisis

This study investigates two potentially complementary reporting scenarios in annual reports: reactive impression management and retrospective sense-making. It examines stock market performance graphs in European listed banks’ annual reports before and during the global financial crisis. Our results indicate that banks reacted to the global financial crisis by omitting stock market performance graphs from the annual report and from its most prominent sections. On the other hand, banks reduced favorable distortions and favorable performance comparisons. No significant evidence of retrospective sense-making is found. Overall, the findings are consistent with impression management incorporating human cognitive biases, with companies preferring misrepresentation by omission over misrepresentation by commission. Under high public scrutiny, banks appear to seek to provide a more favorable view by concealing negative information rather than by favorable distortions or comparisons. The study contributes to the development of impression management theories. It uses a psychological interpretation that incorporates human cognitive biases, rather than adopting a purely economically based perspective.

R&D disclosures and earnings management

2019 ◽  
Vol 18 (1) ◽  
pp. 111-130
Author(s):  
Nadia Lakhal ◽  
But Dedaj
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Voluntary Disclosure ◽  
Management Practices ◽  
Global Financial Crisis ◽  
Annual Reports ◽  
Managerial Behavior ◽  
Data Set ◽  
Content Type ◽  
Ifrs Adoption

Purpose The purpose of this paper is to examine the effect of Research and Development (R&D) disclosures on earnings management practices. Design/methodology/approach This study has been conducted by using a longitudinal archival data set of French companies belonging to the CAC All-Tradable index and instrumental variable estimations. Findings The results of the research highlight the moderating effect of International Financial Reporting Standards (IFRS) adoption and the financial crisis in this relationship. It also shows that R&D disclosures are negatively associated with earnings management. The findings also show that the IFRS adoption is complementary in its monitoring role of managerial behavior in reducing earnings management in the presence of R&D disclosures. Furthermore, this study finds that the negative effect of R&D disclosures on earnings management is more prevalent during the global financial crisis. Originality/value This study examined the consequences of the voluntary disclosure of R&D information in the French context. It introduces a measurement for the disclosure of R&D activities in annual reports through the construction of an R&D disclosure index.

scholarly journals Does graphical reporting improve risk disclosure? Evidence from European banks

2018 ◽  
Vol 19 (1) ◽  
pp. 161-180 ◽  
Author(s):  
Michael Jones ◽  
Andrea Melis ◽  
Silvia Gaia ◽  
Simone Aresu
Keyword(s):  
Credit Risk ◽  
Impression Management ◽  
Perspective Taking ◽  
Voluntary Disclosure ◽  
Cognitive Biases ◽  
Annual Reports ◽  
Theory Approach ◽  
Risk Disclosure ◽  
Content Type ◽  
Incremental Information

Purpose The purpose of this paper is to examine the voluntary disclosure of risk-related issues, with a focus on credit risk, in graphical reporting for listed banks in the major European economies. It aims to understand if banks portray credit risk-related information in graphs accurately and whether these graphs provide incremental, rather than replicative, information. It also investigates whether credit risk-related graphs provide a fair representation of risk performance or a more favourable impression than is warranted. Design/methodology/approach A graphical accuracy index was constructed. Incremental information was measured. A multi-level linear model investigated whether credit risk affects the quantity and quality of graphical credit risk disclosure. Findings Banks used credit risk graphs to provide incremental information. They were also selective, with riskier banks less likely to use risk graphs. Banks were accurate in their graphical reporting, particularly those with high levels of credit risk. These findings can be explained within an impression management perspective taking human cognitive biases into account. Preparers of risk graphs seem to prefer selective omission over obfuscation via inaccuracy. This probably reflects the fact that individuals, and by implication annual report’s users, generally judge the provision of inaccurate information more harshly than the omission of unfavourable information. Research limitations/implications This study provides theoretical insights by pointing out the limitations of a purely economics-based agency theory approach to impression management. Practical implications The study suggests annual reports’ readers need to be careful about subtle forms of impression management, such as those exploiting their cognitive bias. Regulatory and professional bodies should develop guidelines to ensure neutral and comparable graphical disclosure. Originality/value This study provides a substantive alternative to the predominant economic perspective on impression management in corporate reporting, by incorporating a psychological perspective taking human cognitive biases into account.

scholarly journals Production Efficiency Analysis of the Hungarian Meat Processing Industry

Competitio ◽  
2015 ◽  
Vol 14 (1) ◽  
pp. 23-42
Author(s):  
Zombor Berezvai
Keyword(s):  
Financial Crisis ◽  
Production Efficiency ◽  
Global Financial Crisis ◽  
High Capacity ◽  
Function Estimation ◽  
Meat Processing ◽  
Firm Level ◽  
Processing Industry ◽  
Market Situation ◽  
The Global Financial Crisis

This paper analyzes the performance of the Hungarian meat processing industry in the wake of the global financial crisis. Between 2011 and 2013 many high-capacity meat processors went bankrupt in Hungary. Possible reasons for that could be unfavorable market situation and inefficiency in production. In this paper, the latter hypothesis is examined. Two different types of production function estimation techniques are used to calculate firm-specific inefficiency estimates. Based on the estimation results, the lower bound of average firm-level efficiency is 0.50, while the upper bound is 0.88. Estimated firm-level inefficiencies are compared to the characteristics of the given firms. Pre-tax profit, company size and domestic ownership are associated with lesser inefficiency. On the other hand, time trend of inefficiencies indicate that the global financial crisis negatively affected the production efficiency of the meat processors. This can be a reason behind the bankruptcies happened. Journal of Economic Literature (JEL) codes: C33, L66

scholarly journals Determinants of failure in Greek manufacturing SMEs

2017 ◽  
Vol 14 (3) ◽  
pp. 45-55 ◽  
Author(s):  
Efthalia Tabouratzi ◽  
Christos Lemonakis ◽  
Alexandros Garefalakis
Keyword(s):  
Financial Crisis ◽  
Financial Reporting ◽  
Fixed Effects ◽  
Global Financial Crisis ◽  
Manufacturing Sector ◽  
Bank Lending ◽  
Policy Implications ◽  
Z Score ◽  
The Government ◽  
The Global Financial Crisis

The globalization and the global financial crisis provide a new extremely competitive environment for small and medium sized enterprises (SMEs). During the latest years, the increased number of firms’ default has generated the need of understanding the factors of firms’ default, as SMEs in periods of financial crisis suffer from lack of financial resources and expensive bank lending. We use a sample of 3600 Greek manufacturing firms (9 Sectors), covering the time period of 2003-2011 (9 years). We run a panel regression model with correction for fixed effects in both the cross-section and period dimensions using as dependent variable the calculated Z-Score of each firm, and as independent variables several financial ratios, as well as the exporting activity and the use of International Financial Reporting Standards (IFRS Accounting Standards).We find that firms presenting higher performance in terms of ROA and sales and higher leverage levels that enhance their liquidity as well are healthier in terms of Z-score than their less profitable counterparts and acquire lower rates of probability of default: in other words, less risk. The results of the study can lead to policy implications for both Managers and the Government in order to enhance the growth of Greek manufacturing sector.

GAAP-adjusted earnings disclosures by New Zealand companies

2015 ◽  
Vol 27 (3) ◽  
pp. 329-352 ◽  
Author(s):  
Liz Rainsbury ◽  
Carol Hart ◽  
Nonthipoth Buranavityawut
Keyword(s):  
New Zealand ◽  
Financial Reporting ◽  
Global Financial Crisis ◽  
Relevant Information ◽  
Annual Reports ◽  
Content Type ◽  
Future Earnings ◽  
Reporting Practices ◽  
Financial Reporting Standards ◽  
The Global Financial Crisis

Purpose – This paper aims to examine motivations for the reporting of generally accepted accounting practice (GAAP)-adjusted earnings by New Zealand companies. Design/methodology/approach – The study uses multivariate analysis of data from New Zealand company annual reports for the period from 2004 to 2012. Findings – Evidence suggests that management of some New Zealand firms are motivated to use GAAP-adjusted earnings to provide a more favourable impression of earnings. However, across firms, these adjusted earnings provide a better predictor of future earnings and provide more value-relevant information to the market than GAAP earnings. Thus, a desire to disclose a more accurate indicator of permanent earnings appears to be a strong factor in the reporting of GAAP-adjusted earnings. Research limitations/implications – The study uses firms listed on the New Zealand share market. The number of firms examined is small, but we compensate by studying the entire population, thus avoiding sampling issues. The results suggest that New Zealand’s regulatory response of recommending guidelines for reporting alternative earnings measures is appropriate. Originality/value – The study contributes to the literature on the relationship between reporting statutory earnings and non-GAAP earnings. It uses a period that includes three major events in the New Zealand economy and reporting environment: the adoption of international financial reporting standards, a change in tax law and the global financial crisis. Recognition of these events allows us to better interpret the GAAP-adjusted reporting practices taken by managers.

The value relevance of intellectual capital disclosure: empirical evidence from Kuwait

2017 ◽  
Vol 25 (1) ◽  
pp. 22-38 ◽  
Author(s):  
Mishari M. Alfraih
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Intellectual Capital ◽  
Value Relevance ◽  
Practical Implication ◽  
Listed Companies ◽  
Annual Reports ◽  
Equity Valuation ◽  
Content Type ◽  
Market Participants

Purpose Drawing on market efficiency theory and studies on intellectual capital (IC) disclosure, this study aims to examine if IC information provided in the corporate annual reports of Kuwait Stock Exchange (KSE) listed companies in 2013 is value-relevant. Design/methodology/approach The analysis is divided into two parts. First, the level of intellectual capital disclosure (ICD) of KSE-listed companies is examined using the content analysis method. Second, the value relevance of financial reporting is examined empirically using Ohlson’s (1995) valuation model. Findings The results reveal that ICD is positively and significantly associated with market value, suggesting that greater ICD is valued by KSE market participants, who incorporate it into their valuation models. Practical implications Given the importance of ICD in enhancing equity valuation, a practical implication of this study is to make managers aware of its positive and significant effect on equity valuation, which may encourage companies to increase their level of disclosure. Originality/value This is the first study of the association between the level of ICD and the value relevance of financial reporting for market participants in Kuwait. It therefore extends and confirms the prior literature by broadening its scope to include frontier markets. Furthermore, it provides empirical evidence in support of recent calls from regulators and professional bodies for information that supplements and complements traditional financial reporting.

Determinants of corporate social responsibility disclosures of UAE national banks: a multi-perspective approach

2019 ◽  
Vol 16 (5) ◽  
pp. 631-654
Author(s):  
Elie Menassa ◽  
Nancy Dagher
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Arab World ◽  
Annual Reports ◽  
Content Type ◽  
Explanatory Factors ◽  
The World ◽  
Corporate Social

PurposeThis paper aims to examine the determinants and extent of corporate social disclosure (CSD) by UAE national banks and to investigate the changes in CSD before, during and after the latest financial crisis.Design/methodology/approachDeductive in nature, this paper uses content analysis of annual reports of 16 UAE banks over a period of six years (2006-2011) to test eight hypotheses related to size, financial performance and other variables as potential explanatory variables of the CSD extent over different periods.FindingsThe findings show that human resources and community disclosures exhibited the highest extent of CSD over the six years. Moreover, the size and financial performance variables appear to be significant explanatory factors for the extent of CSD. The findings also indicate a strong variation in disclosure between banks with international presence and those with no such presence, while there is no significant disclosure variation between Islamic and conventional banks or during the different periods under investigation (pre, during and post recent financial crisis).Research limitations/implicationsStudies allowing a greater understanding of how banks with extensive governmental ownership define and disclose CSR in this particular region of the world are scarce and exploratory in nature. Consequently, the structure of national UAE banks provides a unique opportunity to understand the CSR mechanisms and disclosure of similar institutions in the world (particularly in the Arab world). This presents an interesting direction for further research.Practical implicationsThese findings could assist UAE bankers and policymakers in integrating CSD in their corporate strategies and help the local and international business communities in understanding the characteristics of CSD in the UAE.Originality/valueComprehensive in scope, this paper provides a complete assessment of the potential explanatory proxies of CSD by UAE local banks before, during and after the recent global financial crisis. Comparable studies of the UAE banking sector have mainly focused on particular bank types (i.e. Islamic or conventional) and did not consider the effect of the recent adverse financial climate.

scholarly journals Exploring the meaning of climate change discourses: an impression management exercise?

2019 ◽  
Vol 32 (2) ◽  
pp. 113-128 ◽  
Author(s):  
Nik Nazli Nik Ahmad ◽  
Dewan Mahboob Hossain
Keyword(s):  
Climate Change ◽  
Impression Management ◽  
Practical Implication ◽  
Management Strategies ◽  
Annual Reports ◽  
Content Type ◽  
Climate Change Information ◽  
Environmentally Sensitive ◽  
Practical Implications ◽  
Different Levels

Purpose This study aims to analyze how language is used to present climate change information in the narratives of Malaysian companies’ annual reports. Design/methodology/approach The study uses content analysis and discourse analysis, and Brennan et al.’s (2009) impression management strategies and legitimacy theory were applied to explain findings. Findings Much of the discourses are rhetorical in nature and can be considered as corporate attempts to appear concerned for climate change, consistent with an attempt to appear legitimate and manage impressions. Research limitations/implications The first limitation is the purposive sampling used which limits the generalizability of the findings. The second limitation is that the study neglects to focus on companies in environmentally sensitive sectors which have more substantial adverse impacts. The third limitation is that the study did not examine all types of impression management strategies, limiting itself only to strategies which provide a favorable view of the firm. Finally, the study did not attempt to investigate the different levels of impression management strategies. Practical implications A major practical implication is for regulators to consider mandatory climate change reporting at least for the sectors which contribute adversely to global warming. Originality/value This is a first attempt to examine climate change discourses in a developing country.

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