Purpose The purpose of this paper is to investigate whether financial companies of the USA are inclined to manipulate the management discussion and analysis (MD&A) tone and thus to follow impression management behaviours. Also, the paper proposes a tone analysis of MD&As conducted by comparing the tone of MD&As of one year with financial conditions of the same year and the next. Design/methodology/approach The tone analysis is conducted on two sub-samples of US-listed financial companies, unhealthy firms and healthy firms, which experienced different financial conditions between 2002 and 2011. Findings With regard to healthy firms, MD&A tone is useful to explain the current year’s performance and helps to predict next year performance, whereas, with reference to unhealthy companies, managers use the tone to pursue impression management strategies, by using more positive words and more future-oriented words than healthy companies. Research limitations/implications This study analyses the correlation between MD&A tone at time t and financial performance at time t and t+1, it does not investigate other time spans. The empirical results of this study cannot be generalized to other countries. Practical implications Main implications are addressed to regulators and policy makers, which may contrast impression management through a more effective regulation. Another implication regards investors, who cannot fully rely on MD&As of unhealthy companies. Originality/value This study analyses financial companies, rather neglected by the literature on MD&A tone. Results suggest that financial firms are also inclined to engage in impression management. This research would be useful for investors who base their decisions on qualitative analysis, interested in understanding to what extent the MD&A narratives are reliable.
Manuscript Type Empirical Research Question/Issue Based on both institutionalized agency theory and meso‐level theory, this study examines corporate governance disclosure in an audit firm's transparency report (TR) and whether more disclosure is associated with (a) the audit function of the country in which it is disclosed; (b) high levels of investor confidence in public interest entities (PIEs) shown in the portfolio of the audit firm; and (c) increased competition within the audit market. Research Findings/Insights On the basis of content analysis, different measures of a corporate governance disclosure index (CGDI) are calculated for a sample of 122 auditing firms from 10 European countries over the period 2010–2012. Despite attempts at harmonizing audit practice across the EU, results confirm the role of institutional context in explaining differences among European countries. Moreover, while the CGDI reveals that the TR does improve investor confidence, no evidence was found that the new disclosure requirement unsettled audit market concentration. Theoretical/Academic Implications Results support arguments of the institutionalized agency theory that audit firms’ corporate governance disclosures depend on both firm‐ and country‐level factors. Moreover, the interplay between these macro and meso factors explains the information asymmetry reduction that exists between auditors and shareholders, thus improving micro‐level investor confidence. Practitioner/Policy Implications The study provides an analysis of audit firm transparency based on the information disclosed in mandatory TRs. Policymakers and practitioners may benefit from the knowledge of items included in the TRs expected to impact on investor confidence. It also proposes the use of the TR for achieving market competition strategies, although it may be inefficient.
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The paper aims at analyzing the relationship between the level of integration of the ERP system and the information quality perceived by managers due to direct and indirect factors. In the latter model, the informatio n quality is affected by the presence of specific features of information flow, defined as the information processing capacity, the frequency of meeting, and the information sharing. To test the research model, a PLS-SEM analysis was applied to a survey conducted in the Italian setting. Empirical results show that the level of integration of the ERP system positively affects the latent variable (features of information flow) and that the features of information flow positively affect the perceived quality of information. Empirical results also suggest that the level of integration of ERP systems can positively and indirectly affect the information quality seen by managers, by the effect of the features of information flow. Managers can benefit from this study for supporting their decision to achieve an optimal level of integration of their ERP systems to enhance the information quality within the firm.
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