Religion and disclosure of non-GAAP earnings

IF 2.8 3区 管理学 Q2 BUSINESS, FINANCE
Wei Jiang, Pureum Kim, Myungsoo Son
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Abstract

Purpose The purpose of this study is to examine whether non-generally accepted accounting principles (GAAP) earnings disclosed by firms headquartered in high religious areas (religious firms) are more informative. The non-GAAP disclosure is voluntary and not subject to external audits, and it is difficult to verify the accuracy ex post, which provides management with incentives to strategically use non-GAAP reporting. This study examines religiosity as a potential governance mechanism that reduces management opportunism. Design/methodology/approach Using a comprehensive sample from 2010 to 2018, the authors conduct univariate analyses and regression tests. Religiosity is measured by the number of religious adherents in the Metropolitan Statistical Areas of a firm’s headquarter location. Findings This study finds that religious firms disclose non-GAAP earnings more frequently compared to non-religious firms. This study further documents that religiosity is negatively associated with aggressive non-GAAP reporting. It also finds that items excluded by religious firms in calculating non-GAAP earnings are less associated with future performance, suggesting that these excluded items are transient and, thus, of higher quality. Finally, the market returns on unexpected non-GAAP earnings (i.e. earnings response coefficients) are greater for religious firms. Overall, the results of this study show that non-GAAP reporting by religious firms is more likely to be informative rather than opportunistic. Research limitations/implications Despite the authors’ best endeavors, this study does not fully address the issue of endogeneity, and therefore, the results of this study must be interpreted as strong association rather than causation. Practical implications Religious social norms (regional level) can complement a firm’s corporate governance and ethical codes (firm level) by attenuating undesirable, opportunistic management practices. These findings should be informative to investors who assess the quality non-GAAP disclosures. The findings of this study are also relevant to regulators [e.g. the Securities and Exchange Commission (SEC)] when they allocate limited resources. The SEC may use less resources for monitoring firms headquartered in religious areas and apply the saved resources on monitoring riskier firms. Originality/value To the best of the authors’ knowledge, this is the first study to show that religiosity may act as a potential monitoring mechanism that attenuates aggressive non-GAAP earnings and enhances the informativeness of non-GAAP. The findings of this study suggest that religious social norms (regional level) can complement a firm’s corporate governance and ethical codes (firm level) by restricting undesirable, opportunistic management practices.
宗教和非公认会计准则收益的披露
本研究的目的是检验总部位于宗教程度高的地区的公司(宗教公司)披露的非公认会计原则(GAAP)收益是否更具信息性。非公认会计准则披露是自愿的,不受外部审计的影响,事后很难核实准确性,这为管理层提供了战略性地使用非公认会计准则报告的激励。本研究探讨了宗教虔诚作为一种潜在的治理机制,可以减少管理机会主义。设计/方法/方法采用2010 - 2018年的综合样本,进行单变量分析和回归检验。宗教虔诚度是通过公司总部所在地的大都市统计区域的宗教信徒数量来衡量的。研究发现:与非宗教公司相比,宗教公司披露非公认会计准则收益的频率更高。这项研究进一步证明,宗教信仰与积极的非公认会计准则报告负相关。研究还发现,在计算非公认会计准则收益时,被宗教公司排除在外的项目与未来业绩的关系较小,这表明这些被排除在外的项目是暂时的,因此质量更高。最后,宗教公司的非公认会计准则预期收益(即收益反应系数)的市场回报更大。总的来说,这项研究的结果表明,宗教公司的非公认会计准则报告更有可能提供信息,而不是机会主义。尽管作者尽了最大的努力,但本研究并没有完全解决内生性问题,因此,本研究的结果必须被解释为强关联而不是因果关系。宗教社会规范(地区层面)可以通过减少不受欢迎的机会主义管理实践来补充公司的公司治理和道德规范(公司层面)。这些发现应该对评估非公认会计准则披露质量的投资者提供信息。本研究的发现也适用于监管机构(如证券交易委员会(SEC))在分配有限资源时。美国证券交易委员会可以减少对总部设在宗教地区的公司的监管,并将节省下来的资源用于监管风险较高的公司。原创性/价值据作者所知,这是第一项研究表明,宗教信仰可能作为一种潜在的监测机制,削弱激进的非公认会计准则收益,增强非公认会计准则的信息量。本研究的结果表明,宗教社会规范(地区层面)可以通过限制不受欢迎的、机会主义的管理实践来补充公司的公司治理和道德规范(公司层面)。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
5.40
自引率
13.80%
发文量
45
期刊介绍: The key areas addressed are: ■Audit and Assurance (financial and non-financial) ■Financial and Managerial Reporting ■Governance, controls, risks and ethics ■Organizational issues including firm cultures, performance and development In addition, the evaluation of changes occurring in the auditing profession, as well as the broader fields of accounting and assurance, are also explored. Debates concerning organizational performance and professional competence are also covered.
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