Ahmed, Y., Elsayed, M. and Xu, B. orcid.org/0000-0003-3512-5834 (2024) Bankruptcy in the UK: Do managers talk the talk before walking the walk? British Journal of Management. ISSN 1045-3172
Abstract
This study examines whether managers employ the annual report textual disclosures as a conduit to communicate the probability of future corporate bankruptcy or to intentionally mislead stakeholders due to impression management incentives. We conduct various examinations around the information content of the tone conveyed by textual disclosures in the unstructured UK annual reports and the probability of corporate bankruptcy. We document that firms that communicate a more net positive tone are associated with lower bankruptcy risk. Importantly, this association is found to be stronger for firms whose managers have a lower incentive to mislead investors due to better board monitoring, stringent stock market regulation, and Big 4 audits. We also offer complementary evidence that firms conveying a more net positive tone exhibit higher future performance and earnings persistence, and lower future performance volatility. These firms are also less likely to exhibit extreme corporate policies and receive a qualified auditor’s opinion. Overall, this study sheds light on whether managers tend to inform or misinform (bury their heads in the sand) about corporate bankruptcy.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors. British Journal of Management published by John Wiley & Sons Ltd on behalf of British Academy of Management. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 02 Feb 2024 10:30 |
Last Modified: | 27 Feb 2024 09:41 |
Status: | Published online |
Publisher: | Wiley |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:208487 |