Predicting Accounting Misconduct: The Role of Firm-Level Investor Optimism
Motivated by a large literature on how firm-specific resources (such as leadership and management skills, strategies, organizational capabilities and intellectual properties) drive firm performance, we propose and find that heterogeneity in investor optimism regarding firm-specific attributes plays...
| Authors: | ; |
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| Format: | Electronic Article |
| Language: | English |
| Check availability: | HBZ Gateway |
| Journals Online & Print: | Drawer...
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| Fernleihe: | Fernleihe für die Fachinformationsdienste |
| Published: |
Springer
2019
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| In: |
Journal of business ethics
Year: 2019, Volume: 160, Issue: 2, Pages: 535-562 |
| Further subjects: | B
Financial Reporting
B Investor optimism B Market reactions B Irregularity B G10 B Accounting misconduct B Earnings management B G34 B G14 B G38 |
| Online Access: |
Volltext (lizenzpflichtig) |
| Summary: | Motivated by a large literature on how firm-specific resources (such as leadership and management skills, strategies, organizational capabilities and intellectual properties) drive firm performance, we propose and find that heterogeneity in investor optimism regarding firm-specific attributes plays a very important role in influencing the managerial propensity to manipulate financial statements. When firm-level investor optimism is moderate, the incidence of accounting misconduct increases, but it decreases when investors are highly optimistic. Further, market reaction to the announcement of financial restatements is more negative when investors held more optimistic firm-specific beliefs at the time of initial misstatement. These findings are robust to alternative firm-specific optimism measures linked to analysts, general investors and unsophisticated individual investors, controls for market-wide consumer sentiment unexplained by macroeconomic factors, economy-wide and industry-level optimism, potential selection bias and reverse causality. Our analysis highlights the importance of firm-level investor optimism in predicting, preventing and detecting accounting misconduct. |
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| ISSN: | 1573-0697 |
| Contains: | Enthalten in: Journal of business ethics
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| Persistent identifiers: | DOI: 10.1007/s10551-018-3848-8 |