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Article
Publication date: 15 March 2024

Sourour Hamza and Anis Jarboui

This paper explores how the disclosure quality, measured by the abnormal tone of environmental and social report, may determine the environmental, social and corporate governance…

Abstract

Purpose

This paper explores how the disclosure quality, measured by the abnormal tone of environmental and social report, may determine the environmental, social and corporate governance (ESG) performance of the firm. This study also investigates the impact of the moderator “board of directors” to explore the extent to which a well-balanced board of directors may affect this association within an impression management strategy.

Design/methodology/approach

This work uses a sample of 616 firm-year observations using a sample of French firms indexed on SBF120 index from 2010 to 2017. To test the developed hypotheses, the GLS regression is applied and to control for endogeneity issue and sample selection bias, the authors used, respectively, the two stage least square (2SLS) procedure and the Heckman model.

Findings

Findings suggest that a well-balanced board of directors moderates the relationship between the ESG performance and the disclosure quality. The positive effect of abnormal tone management on ESG is weakened by the presence of a good structure of the board, attenuating impression management initiatives.

Research limitations/implications

The research provides evidence of the impact of corporate social responsibility (CSR) reporting quality, in particular disclosure tone management, on the level of ESG performance in the French context. As the board of directors may have a major impact on weakening impression management strategies in particular tone management practices, in order to improve CSR report quality, the authors recommend French companies to ensure a well-balanced board of directors.

Originality/value

This study helps investors to comprehensively evaluate the information disclosed on CSR reports. It unveils that a strong board composition induces better quality of CSR report and brings better ESG performance. Thus, the study results point to the importance of a well-balanced board of directors and the regulation of the narrative disclosure of CSR information.

Details

EuroMed Journal of Business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1450-2194

Keywords

Article
Publication date: 25 March 2024

Yicheng Wang and Brian Wright

The purpose of this paper is to explore how variations in management’s tone within management’s discussion and analysis (MD&A) sections of 10-K reports can serve as an indicator…

Abstract

Purpose

The purpose of this paper is to explore how variations in management’s tone within management’s discussion and analysis (MD&A) sections of 10-K reports can serve as an indicator of tax avoidance and highlight the complex relationship between such linguistic shifts and the tax avoidance decisions within firms.

Design/methodology/approach

The paper uses a textual analysis approach to identify linguistic cues in MD&A sections of 10-K filings related to tax avoidance, going beyond traditional quantitative measures. The study uses differences in negative word occurrences in MD&A to measure management’s tone change and examines various measures of tax avoidance. The sample covers the period from 1993 to 2017 and comprises all firms with 10-K filings available on EDGAR, totaling over 30,000 firm-year observations.

Findings

The findings indicate a complementary relationship between tax avoidance and other drivers of firm performance. When firms have more negative management’s tone, they are less willing to engage in tax avoidance and vice versa. The study’s approach with management’s tone change provides a different and statistically significant improvement in model fit for detecting tax avoidance.

Practical implications

This paper provides actionable insights for detecting tax avoidance through the analysis of management’s tone in corporate disclosures, offering a new tool for researchers, investors and tax authorities. It highlights the importance of linguistic cues as indicators of tax avoidance behavior, complementing traditional financial metrics.

Originality/value

The paper contributes to the literature by using management’s tone change as a time-varying factor to explain tax avoidance behavior. It uncovers a larger set of linguistic cues in MD&A that can be used to detect tax avoidance. This research provides a complementary approach to traditional quantitative tax avoidance measures and offers insights into the overall relationship between tax avoidance and firm performance, going beyond one-dimensional measures typically used in prior literature.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Book part
Publication date: 16 August 2007

Jennifer M. George and Eden B. King

We propose that group affective tone may be dysfunctional for teams faced with complex, equivocal, and dynamically changing tasks and environments. Group affective tone (and in…

Abstract

We propose that group affective tone may be dysfunctional for teams faced with complex, equivocal, and dynamically changing tasks and environments. Group affective tone (and in particular, a positive affective tone) may exacerbate pre-existing tendencies of teams to develop a single-shared reality that team members confidently believe to be valid and to be prone to group-centrism. Alternatively, heterogeneity in member mood states within teams may lead to the development of multiple-shared realities that reflect the equivocality of the teams’ tasks and circumstances and other functional outcomes (e.g., multiple perspectives and minority dissent), which ultimately may enhance team effectiveness.

Details

Affect and Groups
Type: Book
ISBN: 978-0-7623-1413-3

Book part
Publication date: 16 August 2014

Wayne Tervo, L. Murphy Smith and Marshall Pitman

This study examines the influence of firm management’s ethical “tone at the top” (tone) and the working relationship of an auditor with his/her supervisor (senior) on the…

Abstract

This study examines the influence of firm management’s ethical “tone at the top” (tone) and the working relationship of an auditor with his/her supervisor (senior) on the auditor’s propensity to engage in an unethical, dysfunctional auditor behavior (DAB). Findings indicate that environmental factors influence the staff auditor’s decision of whether or not to follow a course of action suggested by the supervisor that is contrary to both the audit program and generally accepted auditing standards (GAAS). Specifically, auditors are influenced by the tone that the partner sets for the firm and by the working relationship that the staff auditor has with the supervising senior auditor. The results of this research have ramifications for the auditing profession, as they identify specific factors outside of auditing standards and beyond an auditor’s moral reasoning capabilities that can influence the acceptance of unethical, dysfunctional behavior.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78190-845-7

Keywords

Article
Publication date: 7 November 2023

Hidaya Al Lawati, Khaled Hussainey and Roza Sagitova

This study aims to examine the impact of a firm’s financial performance on forward-looking disclosure (FLD) tone and assess whether managers are engaging in impression management…

Abstract

Purpose

This study aims to examine the impact of a firm’s financial performance on forward-looking disclosure (FLD) tone and assess whether managers are engaging in impression management or providing truthful explanations when their companies have good or poor performance.

Design/methodology/approach

This study used the content analysis method to measure the tone of FLD in the chairman’s statements of Omani financial institutions for the period 2014–2018. Regression analysis is then used to test the research hypotheses.

Findings

The authors found that good-performing firms are disclosing more good news, whereas poor-performing firms disclose more bad news. The results provided evidence that managers in Oman are providing truthful explanations in their narratives.

Practical implications

This study offered interesting policy and practical implications for policymakers, managers and stakeholders. This paper provided insights to policymakers regarding the FLD tone practices used in the chairman’s reports in Oman. Policymakers should be aware of the importance of the chairman’s reports in the eye of multiple stakeholders and, therefore, need to set guidelines on the type and quality of non-financial voluntary information that should be disclosed in such reports in the context of emerging economies. For academics, evidence has been provided by this study’s results regarding the impact of corporate performance on disclosure tone.

Originality/value

This study offered a novel contribution to disclosure studies by being the first to examine the performance-disclosure narrative tone relation, in the context of Oman.

Details

International Journal of Accounting & Information Management, vol. 31 no. 5
Type: Research Article
ISSN: 1834-7649

Keywords

Book part
Publication date: 15 May 2023

Sarah N. Mitchell, Antoinette M. Landor and Katharine H. Zeiders

Research has shown that for young adults, marital attitudes (e.g., desire, importance, and expectation) are associated with relationship quality. However, how this association…

Abstract

Research has shown that for young adults, marital attitudes (e.g., desire, importance, and expectation) are associated with relationship quality. However, how this association plays out for young adults of color is less known. Additionally, the influence of skin tone perception on the relationship between marital attitudes and relationship quality remains understudied. To explore these associations, the authors examined African American and Latinx young adults (N = 57, Mage = 20.71 years, SD = 1.28; 75.4% female) attending a Midwestern university. Exploratory results indicated that marital expectations were positively associated with relationship quality in that young adults who expected to marry one day, reported greater relationship satisfaction, commitment, and intimacy in their current relationships. Additionally, skin tone perception moderated the association between marital attitudes and relationship quality in two ways (i.e., between expectations and satisfaction and between importance and intimacy). Collectively, findings suggest that differing levels of marital attitudes and skin tone perception contributes to young adults’ perceptions of relationship quality. Considering these psychological factors of attitudes, skin tone perception, and relationship quality, together with systemic racial/ethnic discrimination, the authors discuss future research and practice considerations.

Details

Conjugal Trajectories: Relationship Beginnings, Change, and Dissolutions
Type: Book
ISBN: 978-1-80455-394-7

Keywords

Book part
Publication date: 12 March 2020

Valentina Beretta, Maria Chiara Demartini and Sara Trucco

Voluntary non-financial reporting aims at fairly reporting a firm’s non-financial performance. In particular, integrated reporting (IR) displays in a single report the…

Abstract

Voluntary non-financial reporting aims at fairly reporting a firm’s non-financial performance. In particular, integrated reporting (IR) displays in a single report the contribution of different forms of capital to the firm’s value creation. Drawing on both legitimacy and voluntary disclosure theory, the main purpose of this study is to examine the extent to which a company’s environmental, social, and governance (ESG) performance affects the content and semantic properties of intellectual capital disclosure (ICD) found in IRs.

To test theoretical hypotheses, content and tone analysis is used to assess the disclosure strategy associated with ICD, whereas a regression analysis tests the variation in semantic properties of ICD according to firms’ ESG performance. A total of 79 reports by European listed firms from 2011 to 2016 were downloaded via the Integrated Reporting Emerging Practice Examples Database and analyzed.

Results show that ESG performance contributing more to optimistic ICD tone is governance, although in mixed ways. Integrating vision and strategy positively contributes to ICD tone, whereas information on poor treatment of shareholders’ rights tends to be manipulated and associated with an optimistic tone of the ICD. Moreover, eco-efficient product innovation and healthy and safe job conditions play a positive role in enhancing optimistic ICD tone.

This chapter contributes to the current literature on voluntary disclosure by introducing new evidence on the disclosure strategy in IR. By analyzing the effect of the single dimensions of ESG performance on ICD tone, this study extends respectively ESG literature.

Details

Non-Financial Disclosure and Integrated Reporting: Practices and Critical Issues
Type: Book
ISBN: 978-1-83867-964-4

Keywords

Book part
Publication date: 30 March 2023

Andrew J. Felo and Steven A. Solieri

Financial reporting decisions are influenced by environmental and individual factors. One environmental factor is the example set by management. Research has shown that the tone

Abstract

Financial reporting decisions are influenced by environmental and individual factors. One environmental factor is the example set by management. Research has shown that the tone at the top is related to financial reporting decisions. However, this does not take into consideration that ethical cues from an employee's supervisor might also be relevant. On an individual basis, people who make unethical financial reporting decisions do not appear to be bad or evil people. So, why do these seemingly “good” people make these decisions? The theory of self-concept maintenance (Mazar et al., 2008) posits that individuals balance the desire to gain by behaving unethically with the desire to maintain a positive self-image by behaving ethically. How one balances these is based on one's ability to rationalize an action as honest, with decisions seen as having an ethical component being more difficult to rationalize. Findings indicate that having one person in a leadership position demonstrate a commitment to ethical behavior is related to more ethical financial reporting decisions, whether that person is at the top or closer to the middle. Additionally, a strong tone at the top is related to perceiving a situation is an ethical dilemma while a strong tune in the middle is not. Last, the authors find that a stronger perception that a situation is an ethical dilemma is associated with more ethical financial reporting decisions when the tune in the middle is controlled for, but not when the tone at the top is controlled for.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-80455-792-1

Keywords

Article
Publication date: 30 November 2023

Hesham Bassyouny and Michael Machokoto

This paper aims to investigate the association between negative tone in annual report narratives and future performance in the UK context. Under the principle-based approach in…

Abstract

Purpose

This paper aims to investigate the association between negative tone in annual report narratives and future performance in the UK context. Under the principle-based approach in the UK, managers tend to bias the tone of narrative reports upward, as the reporting regime is more flexible than the rule-based approach in the USA. Consequently, any negative disclosure not mandated by regulators conveys credible information about a firm’s prospects.

Design/methodology/approach

This paper uses a sample of UK FTSE all-share non-financial companies from 2010 to 2019. The authors use the textual-analysis approach based on Loughran and McDonald (2011)’s wordlist (LM) to measure the negative tone in UK annual reports.

Findings

The results show a significant negative association between negative tone and future performance. Moreover, our further analyses suggest that only the negativity in the executive section of the annual disclosures correlates significantly with future performance. In summary, this study suggests that negativity does matter under the principle-based approach and can be used as an indicator of future performance.

Originality/value

In contrast to the literature arguing that only positivity has the power to affect a firm’s outcomes under the principle-based approach, the authors provide new empirical evidence suggesting that negativity also matters within the UK context and can be used as an indicator for future performance. Also, to the best of the authors’ knowledge, this is the first study to identify which section of the annual report is more informative about a firm’s future performance.

Details

International Journal of Accounting & Information Management, vol. 32 no. 2
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 20 November 2023

Fatemeh Saeedi, Mahdi Salehi and Nour Mahmoud Yaghoubi

Financial reports are the basis of economic decisions that affect organizational interests and shareholders. However, there is a severe research gap concerning the factors…

Abstract

Purpose

Financial reports are the basis of economic decisions that affect organizational interests and shareholders. However, there is a severe research gap concerning the factors affecting the quality of financial information (such as audit report readability and tone). Therefore, considering the importance of presenting high-quality financial information, this study aims to investigate the impact of intellectual capital (IC) and its components on the audit report's readability and tone.

Design/methodology/approach

The multivariate regression model tests research hypotheses. Then, hypotheses are tested via a sample of 824 observations of the listed companies on the Tehran Stock Exchange (103 companies) from 2014 to 2021, using the multivariate regression model based on pooled data and fixed effects.

Findings

Results determine that customer capital (CC) and structural capital (SC) are likely to influence the audit report tone positively. In general, the IC and human capital (HC) negatively impact auditors' tone. More analyses also document that IC and its CC, HC and SC components positively and significantly affect audit report readability based on two readability indices, including FOG and text length. Finally, findings pertaining to the third readability index (Flesch index) reveal that only HC and SC are robust based on this measurement, whereas the IC and CC have a negative and significant impact on the readability of auditors’ reports.

Originality/value

To the best of the authors’ knowledge, this study is the first to address this issue in emerging markets, and it provides helpful insights for users, analysts and legal institutions regarding IC, which significantly affects audit report readability and tone.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

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