Language FTR and Earnings Management: International Evidence

50 Pages Posted: 18 Apr 2016

See all articles by Marco Fasan

Marco Fasan

Ca Foscari University of Venice - Department of Management

Giorgio Gotti

University of Texas at El Paso (UTEP)

Tony Kang

University of Nebraska - Lincoln

Yi Liu

McMaster University - Accounting & Financial Management Services

Date Written: April 2016

Abstract

We study whether a particular aspect of language structure, the future-time reference (FTR) of a language, explains variation in corporate earnings management behaviors around the world. Based on the Sapir-Whorf hypothesis (Whorf 1956), we predict that grammatically referencing the future, which induces humans to perceive the future more sharply distinct from the present, induces myopic management behavior. In support of this idea, we find that firms headquartered in strong-FTR language countries are more likely to engage in accrual and real activities earnings management to meet short-term earning benchmarks.

Keywords: Accrual-based Earnings Management, Real Earnings Management, Future-Time-Reference, Language, Myopia, Short-Termism

JEL Classification: M40

Suggested Citation

Fasan, Marco and Gotti, Giorgio and Kang, Tony and Liu, Yi, Language FTR and Earnings Management: International Evidence (April 2016). Available at SSRN: https://ssrn.com/abstract=2763922 or http://dx.doi.org/10.2139/ssrn.2763922

Marco Fasan (Contact Author)

Ca Foscari University of Venice - Department of Management ( email )

San Giobbe, Cannaregio 873
Venice, 30121
Italy

Giorgio Gotti

University of Texas at El Paso (UTEP) ( email )

500 West University Avenue
El Paso, TX 79968-0542
United States

Tony Kang

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Yi Liu

McMaster University - Accounting & Financial Management Services ( email )

Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
350
Abstract Views
1,864
rank
91,689
PlumX Metrics