How Far Will Managers Go to Look Like a Good Steward? A Re-Examination of Honesty Preferences in Managerial Reporting

Abdel-Rahim, Heba; Hales, Jeffrey; Stevens, Douglas E.

doi:10.2139/ssrn.3378237

Cited by 2 publications

(1 citation statement)

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“…Following this literature, we posit that managers who care about how others view them likely care about maintaining not only an impression of competence, but also perceptions of honesty. Indeed, prior literature argues that managers have selfpresentational goals and employ impression management (Abdel-Rahim et al 2019;Asay, Libby, and Rennekamp 2018a;Bloomfield 2002;Chen and Loftus 2019). Impression management is the process by which people seek to control the impressions others form of them (Leary and Kowalski 1990).…”

Section: Public Scrutinymentioning

confidence: 99%

Managing Earnings to Appear Truthful: The Effect of Public Scrutiny on Exactly Meeting a Threshold

Stirnkorb¹

2020

Preprint

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The past two decades have not eliminated managers' willingness to manage earnings to meet and beat earnings thresholds, but have increased investors' skepticism of earnings that exactly meet those thresholds. Using a low-external-context experiment, we find that managers avoid exactly meeting a benchmark, even when they alter true earnings to do so. Thus, we examine a new incentive to manage earnings: misreporting to appear truthful. Specifically, we examine the effect of intensified scrutiny of managers and managers' individual sensitivity and concern about investors' perceptions of them. We find that when earnings exactly meet a benchmark, managers are more likely to misreport earnings when they report under high public scrutiny. This is particularly the case for managers who are low on the Dark Triad scale (and thus more sensitive to others' perceptions). Further, we show that this misreporting increases managers' belief that the market will accept their reports, consistent with managers misreporting for self-presentational goals. These results help explain otherwise undetectable behavior around earnings benchmarks and are important as managers are increasingly scrutinized by critical media, activists, and political oversight bodies, and as they face skepticism via more intimate forms of disclosure and communication, such as social media.

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Section: Public Scrutinymentioning

confidence: 99%

Managing Earnings to Appear Truthful: The Effect of Public Scrutiny on Exactly Meeting a Threshold

Stirnkorb¹

2020

Preprint

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The Folly of Forecasting: The Effects of a Disaggregated Demand Forecasting System on Forecast Error, Forecast Positive Bias, and Inventory Levels

Brüggen

Grabner

Sedatole

2020

The Accounting Review

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Periodic demand forecasts are the primary planning and coordination mechanism within organizations. Because most demand forecasts incorporate human judgment, they are subject to both unintentional error and intentional opportunistic bias. We examine whether a disaggregation of the forecast into various sources of demand reduces forecast error and bias. Using proprietary data from a manufacturing organization, we find that absolute demand forecast error declines following the implementation of a disaggregated forecast system. We also find a favorable effect of forecast disaggregation on finished goods inventory without a corresponding increase in costly production plan changes. We further document a decline in positive forecast bias, except for products whose production is limited owing to scarce production resources. This implies that disaggregation alone is not sufficient to overcome heightened incentives of self-interested sales managers to positively bias the forecast for the very products that an organization would like to avoid tying up in inventory.

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How Far Will Managers Go to Look Like a Good Steward? A Re-Examination of Honesty Preferences in Managerial Reporting

Cited by 2 publications

References 0 publications

Managing Earnings to Appear Truthful: The Effect of Public Scrutiny on Exactly Meeting a Threshold

Managing Earnings to Appear Truthful: The Effect of Public Scrutiny on Exactly Meeting a Threshold

The Folly of Forecasting: The Effects of a Disaggregated Demand Forecasting System on Forecast Error, Forecast Positive Bias, and Inventory Levels

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