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Book part
Publication date: 1 October 2015

Anis Triki, Vicky Arnold and Steve G. Sutton

Research has shown evidence of the use of impression management strategies in corporate disclosures as a means of presumably tempering and swaying investors’ perceptions…

Abstract

Research has shown evidence of the use of impression management strategies in corporate disclosures as a means of presumably tempering and swaying investors’ perceptions. These impression management strategies include shifts in the tone used when providing disclosures. However, recent research also provides evidence that such techniques can have a contrary effect when the tone of the message appears to be “too good to be true.” This study explores how the use of optimism and certainty in the Management Discussion and Analysis (MD&A) portion of the annual report affects nonprofessional investors’ investment decisions – a class of investors known to heavily rely on the MD&A portion of annual reports. We theorize a bifurcated effect where optimism and certainty have a positive and direct effect on investor willingness to invest, but at the same time optimism and certainty have a negative indirect effect on willingness to invest that is mediated through decreased perceptions of disclosure credibility. The results provide evidence supporting such a bifurcated effect from the use of tone in management disclosures.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78441-635-5

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Article
Publication date: 1 March 1995

Marc J. Epstein and Moses L. Pava

This paper reports the results of an extensive study of the effectiveness of MD&As. Our primary research question can be stated as follows: To what extent do MD&As, as…

Abstract

This paper reports the results of an extensive study of the effectiveness of MD&As. Our primary research question can be stated as follows: To what extent do MD&As, as currently issued, meet the self‐perceived needs of individual investors? To answer this question, we examine the responses to a survey questionnaire. The content of the questionnaire was based on an earlier survey conducted in 1973 by Epstein (1975). Our results are based on a random sample of shareholders owning at least 100 shares of one stock on either the New York Stock Exchange or the American Stock Exchange. We conclude that the MD&A section of annual reports is a potentially useful investment tool. In its current state, however, investors read it less, and rank it as less useful than the financial statements. Our survey indicates that it is not difficult to understand. We attribute its poor performance, in part, to a lack of credibility, and, to a larger extent, to a lack of prospective information. Evidence on the relationship between demographic characteristics and usefulness shows that wealthy, inexperienced investors are the only group of investors who are currently using the MD&A in any substantial way.

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Managerial Finance, vol. 21 no. 3
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 8 July 2010

Wei Li

This study provides experimental evidence on whether and how management's use of self-promotion, as a type of proactive impression management strategies in its…

Abstract

This study provides experimental evidence on whether and how management's use of self-promotion, as a type of proactive impression management strategies in its disclosures, influences nonprofessional investors’ judgments and decisions. The results show that management's use of self-promotion influences nonprofessional investors so that investors (1) expect management's future performance to be better and (2) are likely to invest more in the company. These positive effects are more prominent when management's credibility is perceived to be high than when it is low. The findings of this study provide implications for both practice and research.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-0-85724-137-5

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Book part
Publication date: 28 November 2017

Francesco Bellandi

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial…

Abstract

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial statements. This part also includes a detailed critical review of the recent Practice Statement on materiality, the FASB’s proposed ASU on the notes and the amendments to the Conceptual Framework proposed by the IASB and the FASB.

The part expands to issues that are typical of Management Commentary, including the SEC guidance on materiality in Management Discussion and Analysis.

It informs about the complexities and subtle differences between financial statements and bookkeeping and the different standards of reasonableness versus materiality.

A section moves from materiality to material misstatements and covers the application of materiality in auditing.

Another section goes in depth on internal control over financial reporting, showing the linkages between materiality and risk appetite and risk tolerance and the related application guidance.

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Materiality in Financial Reporting
Type: Book
ISBN: 978-1-78743-736-4

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Article
Publication date: 13 March 2020

Jinwook Choi, Yongmoo Suh and Namchul Jung

The purpose of this study is to investigate the effectiveness of qualitative information extracted from firm’s annual report in predicting corporate credit rating…

Abstract

Purpose

The purpose of this study is to investigate the effectiveness of qualitative information extracted from firm’s annual report in predicting corporate credit rating. Qualitative information represented by published reports or management interview has been known as an important source in addition to quantitative information represented by financial values in assigning corporate credit rating in practice. Nevertheless, prior studies have room for further research in that they rarely employed qualitative information in developing prediction model of corporate credit rating.

Design/methodology/approach

This study adopted three document vectorization methods, Bag-Of-Words (BOW), Word to Vector (Word2Vec) and Document to Vector (Doc2Vec), to transform an unstructured textual data into a numeric vector, so that Machine Learning (ML) algorithms accept it as an input. For the experiments, we used the corpus of Management’s Discussion and Analysis (MD&A) section in 10-K financial reports as well as financial variables and corporate credit rating data.

Findings

Experimental results from a series of multi-class classification experiments show the predictive models trained by both financial variables and vectors extracted from MD&A data outperform the benchmark models trained only by traditional financial variables.

Originality/value

This study proposed a new approach for corporate credit rating prediction by using qualitative information extracted from MD&A documents as an input to ML-based prediction models. Also, this research adopted and compared three textual vectorization methods in the domain of corporate credit rating prediction and showed that BOW mostly outperformed Word2Vec and Doc2Vec.

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Data Technologies and Applications, vol. 54 no. 2
Type: Research Article
ISSN: 2514-9288

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Article
Publication date: 1 March 2010

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Journal of Public Budgeting, Accounting & Financial Management, vol. 22 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 May 1983

In the last four years, since Volume I of this Bibliography first appeared, there has been an explosion of literature in all the main functional areas of business. This…

Abstract

In the last four years, since Volume I of this Bibliography first appeared, there has been an explosion of literature in all the main functional areas of business. This wealth of material poses problems for the researcher in management studies — and, of course, for the librarian: uncovering what has been written in any one area is not an easy task. This volume aims to help the librarian and the researcher overcome some of the immediate problems of identification of material. It is an annotated bibliography of management, drawing on the wide variety of literature produced by MCB University Press. Over the last four years, MCB University Press has produced an extensive range of books and serial publications covering most of the established and many of the developing areas of management. This volume, in conjunction with Volume I, provides a guide to all the material published so far.

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Management Decision, vol. 21 no. 5
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 April 1986

The Nature of Business Policy Business policy — or general management — is concerned with the following six major functions:

Abstract

The Nature of Business Policy Business policy — or general management — is concerned with the following six major functions:

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Management Decision, vol. 24 no. 4
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 March 2005

Barbara A. Chaney

A financial statement analysis case uses the government-wide financial statements of Corona, CA to teach students about the financial overview provided in the new…

Abstract

A financial statement analysis case uses the government-wide financial statements of Corona, CA to teach students about the financial overview provided in the new governmental financial reporting model. Educators are struggling to incorporate the new model in their governmental accounting curricula. The case analysis is beneficial to students in three ways. First, the active, case learning approach of using a real world example complements existing pedagogical materials for better mastery of the new reporting model. Second, the case approach of using ambiguity and alternative solutions promotes the development of analytical skills. Third, the written requirement and class discussion promotes the development of communication skills.

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Journal of Public Budgeting, Accounting & Financial Management, vol. 17 no. 2
Type: Research Article
ISSN: 1096-3367

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Book part
Publication date: 28 November 2017

Francesco Bellandi

Part V analyzes the details of how to assess materiality. It first tackles qualitative versus quantitative criteria and the role of professional judgment. It then analyzes…

Abstract

Part V analyzes the details of how to assess materiality. It first tackles qualitative versus quantitative criteria and the role of professional judgment. It then analyzes the selection of quantitative threshold, to expand to the choice of benchmarks. It contrasts the whole financial statements with subaggregates, line items, and components.

Specific sections contrast IASB, FASB, SEC, and other guidance on materiality applied to comparative information, interim reporting, and segment reporting.

The section on estimates mingles complex guidance coming from accounting, auditing, and internal control over financial reporting to explain how the management can improve its assessment of materiality concerning estimates.

After explaining the techniques to move from individual to cumulative misstatements, the part tackles verification ex post, and finally summarizes the intricacies of whether immaterial misstatements are permissible and their consequences.

Details

Materiality in Financial Reporting
Type: Book
ISBN: 978-1-78743-736-4

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