Earnings Management and Impression Management

Posted: 30 Mar 2016

See all articles by Encarna Guillamon Saorin

Encarna Guillamon Saorin

Universidad Carlos III de Madrid

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration

Walter Aerts

University of Antwerp

Date Written: March 30, 2016

Abstract

Despite the increasing complexity and length of firm communication, little is known about how the quality of mandatory and voluntary disclosures relates to each other, or how the insiders that prepare these documents interact. In this paper, we examine the links between impression management in annual results press releases and accruals and real earnings management in the audited financial statements. We show that earnings management is positively associated with impression management. This indicates that firms engaging in self-serving disclosure practices may do so at several levels of firm communication, in an attempt to influence outsiders’ perceptions. However, our results suggest that scrutiny concerns and risk of detection moderate this association. We find that predicted levels of earnings management are more strongly associated with impression management than unpredicted levels of earnings management. Also, we observe a stronger association between impression management and unpredicted levels of real earnings management (less visible) than predicted accruals earnings management (more visible). We further show that this is influenced by the risk of detection.

Keywords: Impression management, annual results press releases, voluntary disclosure, accruals earnings management, real earnings management

Suggested Citation

Guillamon Saorin, Encarna and Garcia Osma, Beatriz and Aerts, Walter, Earnings Management and Impression Management (March 30, 2016). Available at SSRN: https://ssrn.com/abstract=2756424

Encarna Guillamon Saorin (Contact Author)

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Walter Aerts

University of Antwerp ( email )

Prinsstraat 13
Antwerpen, B-2000
Belgium
003232654110 (Phone)
003232654064 (Fax)

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