TY - JOUR
T1 - The perceived credibility of forward-looking performance disclosures
AU - Athanasakou, Vasiliki
AU - Hussainey, Khaled
N1 - This is an Accepted Manuscript of an article published in Accounting and Business Research, (2014), available online: http://www.tandfonline.com/10.1080/00014788.2013.867403
PY - 2014/5/4
Y1 - 2014/5/4
N2 - We investigate the credibility of forward-looking performance disclosures (FLPDs) in the narrative sections of annual reports, as perceived by investors. Our proxy for these disclosures is an index of statements about future performance. We find that companies issue more FLPDs when raising debt or conveying bad news in the financial statements. In the presence of these managerial incentives, investor reliance on FLPDs increases with the quality of earnings reported in the audited financial statements. Our results suggest that firms derive a benefit in terms of higher credibility for their narrative disclosures from having a reputation for high quality earnings.
AB - We investigate the credibility of forward-looking performance disclosures (FLPDs) in the narrative sections of annual reports, as perceived by investors. Our proxy for these disclosures is an index of statements about future performance. We find that companies issue more FLPDs when raising debt or conveying bad news in the financial statements. In the presence of these managerial incentives, investor reliance on FLPDs increases with the quality of earnings reported in the audited financial statements. Our results suggest that firms derive a benefit in terms of higher credibility for their narrative disclosures from having a reputation for high quality earnings.
KW - forward-looking statements
KW - voluntary disclosures
KW - managerial incentives
KW - earnings quality
UR - http://www.tandfonline.com/doi/abs/10.1080/00014788.2013.867403
U2 - 10.1080/00014788.2013.867403
DO - 10.1080/00014788.2013.867403
M3 - Article
SN - 0001-4788
VL - 44
SP - 227
EP - 259
JO - Accounting and Business Research
JF - Accounting and Business Research
IS - 3
ER -