The study aims to investigate whether the discretionary narrative disclosure strategies (DNDS) of impression management (IM) adopted by different banks in the narrative section of 200 annual reports of a sample of 50 banks in five different countries of Middle East and North Africa (MENA) region (Egypt, Jordan, Lebanon, Saudi Arabia, and United Arab of Emirates) vary according to their profitability for 2011-2014. Seven variables were employed to identify the association between profitability and the extent of existence of DNDS of IM in the chairmen’s letters of the bank’s annual reports. These variables are reading ease manipulation (REM), rhetorical manipulation (RM), thematic manipulation (TM), visual and structural implementation (VSM), performance comparisons (PC), choice of earnings number (CEN), and performance attribution (PA). By employing an independent sample t -test, it was found that three out of the seven strategies have differed significantly between banks in terms of profitability. These strategies are REM, PC, and CEN. Specifically, more profitable banks use very difficult language; selects favorable benchmark from prior years; and don’t select favorable earnings number in annual reports narrative. It is interesting to note that banks in MENA region produce narratives – especially the chairmen’s letter the discretionary disclosure section- to influence the perception of their stakeholders rather than to display the narratives in accordance with the “true and fair view” principle of accounting. Therefore, this study recommends regulators for more actively intervening to ensure that the voluntary status of the annual reports is more closely scrutinized by auditors in order to reduce the negative effects of DNDS of IM.
The study aims to investigate the extent of existence of strategies of impression management (IM) in the narrative section of 200 annual reports of a sample of 50 banks in five different countries of Middle East and North Africa (MENA) region (Egypt, Jordan, Lebanon, Saudi Arabia, and United Arab of Emirates) for 2011-2014. Seven variables were employed to identify the existence of IM strategies in the chairmen’s letters of the bank’s annual reports. By employing descriptive statistics, frequency distribution and proportion test, it was found that four out of the seven strategies have existed in the chairmen’s letters. These strategies are reading ease manipulation, visual and structural manipulation, performance comparisons, and performance attribution. It is interesting to note that the narrative of the annual report of major banks in MENA region was very difficult to read. This result may perhaps encourage more consideration to the obstacles of effective communication that are the basic mean of facilitating rational resource decision making. Moreover, the results demonstrated that management of banks in MENA region choose benchmarks that portray current bank performance in the best possible light; further they highlight good news rather than bad news and placing this good news in the most emphasized sections of the chairmen’s letters; also they prefer to blame the environment for bad news, but take the credit themselves for good news. Therefore, the study recommends auditing regulators to issue a new standard in which auditors are required to confirm the reliability of the information in the accounting narratives of banks annual reports.
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