Financial Manipulation: Words Don't Lie

5 Pages Posted: 18 Sep 2010 Last revised: 3 Sep 2013

See all articles by David F. Larcker

David F. Larcker

Stanford University - Graduate School of Business

Brian Tayan

Stanford University - Graduate School of Business

Date Written: July 23, 2010

Abstract

Reliable financial reporting is critical to the efficiency of capital markets. Despite its importance, managers may have incentive to misrepresent financial results for personal gain.

While academics and professionals have developed models to detect aggressive accounting, these have been met with limited success. Still, there is some evidence that quantitative models may be improved through the application of techniques developed by linguists and psychologists to identify deceptive language and behavior.

Why don’t shareholders and analysts apply these techniques to evaluate the truthfulness of management?

Reference: Detecting Deceptive Discussions in Conference Calls (working paper on SSRN), available at: http://ssrn.com/abstract=1572705.

Topics, Issues and Controversies in Corporate Governance and Leadership: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the book Corporate Governance Matters, and A Real Look at Real World Corporate Governance.

Keywords: transparency, disclosure, accounting restatements, corporate governance

JEL Classification: G30, G34

Suggested Citation

Larcker, David F. and Tayan, Brian, Financial Manipulation: Words Don't Lie (July 23, 2010). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-07. Available at SSRN: https://ssrn.com/abstract=1678058

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
601
rank
42,926
Abstract Views
3,036
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information