Investor Reactions to Management Attributions: Revisions versus Late Filings Following Preliminary Earnings Announcements

Abstract

After releasing preliminary earnings, firms may encounter accounting issues that cause them to announce an earnings revision or fail to meet a filing deadline. We experimentally examine how management attributions (accepting responsibility versus denying responsibility) influence investor reactions to these adverse financial reporting events. We find that investor reactions, as measured by perceptions of management trustworthiness and investment recommendations, to earnings revisions are more favorable (unfavorable) when managers accept (deny) responsibility by attributing the revision to an internal (external) factor. In contrast, investor reactions to late filings are not influenced by these management attributions. We also find that when the announcement does not quantify the earnings revision, accepting responsibility results in more favorable perceptions of management trustworthiness but not more favorable investment recommendations. These findings provide novel insights regarding variability in the effectiveness of management attributions to explain an adverse financial reporting event and the consequences for the public interest. Data Availability: Contact the authors for data.