Analyzing Speech to Detect Financial Misreporting

Journal of Accounting Research, Forthcoming

53 Pages Posted: 6 Jan 2010 Last revised: 10 Oct 2011

Jessen L. Hobson

University of Illinois at Urbana-Champaign

William J. Mayew

Duke University - Fuqua School of Business

Mohan Venkatachalam

Duke University - Fuqua School of Business

Date Written: October 9, 2011

Abstract

We examine whether vocal markers of cognitive dissonance are useful for detecting financial misreporting. We use speech samples of CEOs during earnings conference calls and generate vocal dissonance markers using automated vocal emotion analysis software. We begin by assessing construct validity for the software-generated dissonance markers by correlating them with four dissonance-from-misreporting proxies obtained in a laboratory setting. We find a positive association between these proxies and vocal dissonance markers generated by the software, suggesting the software’s dissonance markers have construct validity. Applying the software to CEO speech, we find that vocal dissonance markers are positively associated with the likelihood of irregularity restatements. The diagnostic accuracy levels are 11% better than chance and of similar magnitude to models based solely on financial accounting information. Moreover, the association between vocal dissonance markers and irregularity restatements holds even after controlling for financial accounting and linguistic based predictors. Our results provide new evidence on the role of vocal cues in detecting financial misreporting.

Keywords: Deception Detection, Misreporting, Linguistic Analysis, Vocal Analysis, Cognitive Dissonance

JEL Classification: D82, C91, C88, G29, M41, M42

Suggested Citation

Hobson, Jessen L. and Mayew, William J. and Venkatachalam, Mohan, Analyzing Speech to Detect Financial Misreporting (October 9, 2011). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1531871

Jessen L. Hobson (Contact Author)

University of Illinois at Urbana-Champaign ( email )

4011 Business Instructional Facility
515 East Gregory Drive
Champaign, IL 61820
United States

William J. Mayew

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7781 (Phone)
919-660-7971 (Fax)

HOME PAGE: http://www.fuqua.duke.edu/faculty/alpha/mayew.htm

Mohan Venkatachalam

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7859 (Phone)
919-660-7971 (Fax)

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