Assessing the Information Content of Narrative Disclosures in Explaining Bankruptcy

Tennyson, B. Mack; Ingram, Robert W.; Dugan, Michael T.

doi:10.1111/j.1468-5957.1990.tb01193.x

“…He observes that several subjective steps have to be taken to adapt the content to the program, and that those decisions can be arbitrary and fall outside the concept of traditional intercoder reliability. Conway (2007, p. 187), referring to the work of Linderman (2001) Previous studies dealing with the content of accounting narratives have used computer programmes (e.g., Ingram and Frazier, 1983;Frazier et al, 1984;Tennyson et al, 1990;Smith and Taffler, 2000;Rutherford, 2005;Henry, 2008;Matsumoto et al, 2006;Davis et al, 2007) or a mixture of manual and computer coding (e.g., Smith and Taffler, 1992a;Subramanian et al, 1993;Abrahamson and Park, 1994;Abrahamson and Amir, 1996;Smith and Taffler, 2000). Others have done all the coding manually (e.g., Bettman and Weitz, 1983;Staw et al, 1983;Salancik and Meindl, 1984;Courtis, 1986;Jones, 1988;Lang and Lundholm, 2000;Clatworthy and Jones, 2003).…”

Section: Measuring Impression Managementmentioning

confidence: 99%

Impression Management: Developing and Illustrating a Scheme of Analysis for Narrative Disclosures - A Methodological Note

Brennan

¹

,

Saorín

²

,

Pierce

³

2008

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Publication informationAccounting, Auditing and Accountability Journal, 22 (5) disclosures. An impression management bias score is devised to capture the extent to which impression management introduces bias into corporate narratives. An example of the application of the composite impression management score and impression management bias score methodology is provided.Findings -While not amounting to systematic evidence, the 21 illustrative examples suggest that impression management is pervasive in corporate financial communications using multiple impression management methods, such that positive information is exaggerated, while negative information is either ignored or is underplayed.Originality/value -Four impression management methods are described in detail, illustrated by 21 examples. These four methods are examined together. New impression management methods are studied in this paper for the first time. This paper extends prior impression management measures in two ways. First, a composite impression management score based on four impression management techniques is articulated. Second, the composite impression management score methodology is extended to capture a measure for bias, in the form of an impression management bias score. This is the first time outside the US that narrative disclosures in press releases have been studied.

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“…Bryan (1997) examined the information content of the Management Discussion and Analysis (MDandA) as a basis for predicting firms' future short-term performance. Tennyson et al (1990) used content analysis of narratives in the annual report for bankruptcy predictions. Smith and Taffler (2000) used content analysis to study the chairman's statement in the annual report.…”

Section: Literature Reviewmentioning

confidence: 99%

Non-Financial Risk Disclosure: The Case of the UK’s Distressed Banks

Adelopo¹

2017

AABFJ

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This study investigates the narratives risk disclosures of the four British financial institutions that were adversely affected during the 2008 banking crisis. This investigation uses content analysis with the aid of Concordance software to explore the risk disclosure of these companies for the period 1998-2008. Risk disclosures in the Business Review sections of the annual reports of the banks were analysed into their historic and forward looking contents, and current firm performance was measured with respect to earnings per share (EPS) and dividend, while future performance was measured by growth in EPS, and positive time lag in EPS.Consistent with its predictions, the study found a significant negative relationship between the extent of historic narrative disclosures and current and future firm performance, and a significant positive relationship between forward looking narrative risk disclosures and both current and future firm performance. Additional analysis shows that optimistic and pessimistic narrative risk disclosures are not significant in explaining current and future firm performance for these firms.Findings from this study are important for users of the financial statements and regulators because they highlight an opportunity to detect warning signals for companies at risk of collapse. The study adds to the growing number of empirical investigations that provide alternative approaches to understanding business failures. AbstractThis study investigates the narratives risk disclosures of the four British financial institutions that were adversely affected during the 2008 banking crisis. This investigation uses content analysis with the aid of Concordance software to explore the risk disclosure of these companies for the period 1998-2008. Risk disclosures in the Business Review sections of the annual reports of the banks were analysed into their historic and forward looking contents, and current firm performance was measured with respect to earnings per share (EPS) and dividend, while future performance was measured by growth in EPS, and positive time lag in EPS. Consistent with its predictions, the study found a significant negative relationship between the extent of historic narrative disclosures and current and future firm performance, and a significant positive relationship between forward looking narrative risk disclosures and both current and future firm performance. Additional analysis shows that optimistic and pessimistic narrative risk disclosures are not significant in explaining current and future firm performance for these firms. Findings from this study are important for users of the financial statements and regulators because they highlight an opportunity to detect warning signals for companies at risk of collapse. The study adds to the growing number of empirical investigations that provide alternative approaches to understanding business failures. JEL Classification: M40

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“…As shown in Table 1, thematic analysis has been carried out by reference to keywords (Tennyson et al, 1990;Abrahamson and Park, 1994;Abrahamson and Amir, 1996;Smith and Taffler, 2000;Clatworthy and Jones, 2003;Rutherford, 2005;Henry, 2008), tone/language (Lang and Lundholm, 2000;Davis et al, 2006), and using other constructs (Smith and Taffler, 1995;Lang and Lundholm, 2000;Clatworthy and Jones, 2006;Henry, 2008). The methodology of Tennyson et al (1990) is complex and includes analysis of the relationships of the frequencies of words, and factor analysis of to this research.…”

Section: Analysis Of Abstractmentioning

confidence: 99%

“…The methodology of Tennyson et al (1990) is complex and includes analysis of the relationships of the frequencies of words, and factor analysis of to this research. This is due to a number of factors: (1) the present study includes all keywords appearing in the press releases, even though the usage frequency might be very limited (e.g., the words "disruption", "boosted" and "rockets" appear only once in the sample), (2) similar to Abrahamson and Park (1994), Abrahamson and Amir (1996) and Clatworthy and Jones (2003), grammatical variations of words are also counted as separate keywords (e.g., "extended", "extending", "extensions" and "extensive").…”

Section: Analysis Of Abstractmentioning

confidence: 99%

Methodological Insights

Brennan

¹

,

Guillamón‐Saorín

²

,

Pierce

³

2009

Accounting, Auditing &Amp; Accountability Journal

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Publication informationAccounting, Auditing and Accountability Journal, 22 (5) disclosures. An impression management bias score is devised to capture the extent to which impression management introduces bias into corporate narratives. An example of the application of the composite impression management score and impression management bias score methodology is provided.Findings -While not amounting to systematic evidence, the 21 illustrative examples suggest that impression management is pervasive in corporate financial communications using multiple impression management methods, such that positive information is exaggerated, while negative information is either ignored or is underplayed.Originality/value -Four impression management methods are described in detail, illustrated by 21 examples. These four methods are examined together. New impression management methods are studied in this paper for the first time. This paper extends prior impression management measures in two ways. First, a composite impression management score based on four impression management techniques is articulated. Second, the composite impression management score methodology is extended to capture a measure for bias, in the form of an impression management bias score. This is the first time outside the US that narrative disclosures in press releases have been studied.

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Assessing the Information Content of Narrative Disclosures in Explaining Bankruptcy

Cited by 107 publications

References 25 publications

Impression Management: Developing and Illustrating a Scheme of Analysis for Narrative Disclosures - A Methodological Note

Impression Management: Developing and Illustrating a Scheme of Analysis for Narrative Disclosures - A Methodological Note

Non-Financial Risk Disclosure: The Case of the UK’s Distressed Banks

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