Profit and Loss from the Management Perspective: How Are the Earnings Presented in the Management Reports?
Journal of Education and Research in Accounting, REPeC, Brasília, v. 8, n. 4, art. 1, p. 344-360, October/December 2014
29 Pages Posted: 2 Jan 2015 Last revised: 8 Feb 2015
Date Written: 2014
This paper aims to analyze how textual information on company earnings are presented in the Management Reports in alternating periods of profit and loss. The theoretical foundations were based on the agency theory and on impression management. A qualitative-quantitative approach was adopted and the data were analyzed through statistical tests of comparison of means based on content analysis. Management Reports were analyzed from 30 companies listed on BM&FBovespa – which presented profit in 2009 and loss in 2010. The main evidence found in the management report analysis were: i) difference in the number of lines and words between the profit and loss periods; ii) in loss periods, the occurrence of terms that express this result is limited and the terms Ebitda and gross margin are highlighted; and iii) there are signs of deviation of the users’ attention from the earnings to other indicators through the selection and repetition of financial terms, reducing the exposure of the negative results and enhancing the positive indicators. These results indicate an environment that reflects the information asymmetry problems, in which regulatory entities should develop policies to monitor the discretionary choices on Financial Statements that can mislead the market participants.
Keywords: Disclosure, Management reports, Impression management
JEL Classification: M40, M41, M49, M14
Suggested Citation: Suggested Citation