Does Accounting Conservatism Discipline Qualitative Disclosure? Evidence From Tone Management in the MD&A

• 成果类型: Article
• 署名作者: D'Augusta, Carlo; DeAngelis, Matthew D.
• 署名单位: Middle Tennessee State University; University System of Georgia; Georgia State University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12598
• 发表日期: 2020
• 页码: 2287-2318
• 关键词: earnings management; unconditional conservatism; information-content; Private Firms; STOCK; incentives; Timeliness; PROTECTION; OWNERSHIP; liability

摘要

We investigate whether accounting conservatism, which has been found to be effective in constraining management opportunism in other settings, constrains upward tone management (UTM) in the Management's Discussion and Analysis (MD&A) portion of the 10-K filing. We hypothesize that conservatism makes it harder for managers to opportunistically downplay bad news and magnify good news when discussing current performance. Consistent with this hypothesis, we find that UTM is negatively associated with several accounting conservatism proxies. Additionally, we hypothesize and find that this association is stronger for firms where managers have higher incentives to manipulate tone. In supplemental analyses, we find evidence to suggest that our results are not due to an endogenous relationship between conservatism and UTM. We also find that conservatism neither encourages downward tone management (DTM) nor constrains managers from conveying real information about future good news. Together, our results suggest that accounting conservatism improves disclosure narratives.