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Disclosure Tone, Financial Performance and Earnings Management: Evidences from UK Conference Calls

Kayed, S. (2020) Disclosure Tone, Financial Performance and Earnings Management: Evidences from UK Conference Calls. PhD thesis, University of Reading

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To link to this item DOI: 10.48683/1926.00094953


The key focus of this thesis is why firms engage in tone management in earnings conference calls. Specifically, the first objective in this thesis is to examine whether managerial tone can be used to signal a firm’s financial performance. The second objective is to examine when firms engage more in earnings management to meet or just beat the earnings benchmark; whether managers use their tone strategically to communicate with their stakeholders. This thesis reviews the theories and the current literature related to management communication in corporate reporting and disclosures, and has two interrelated studies looking at the tone management in the earnings conference calls of United Kingdom (UK) non-financial FTSE 350 companies for the period from 2010 to 2015. The first study examines the associations between tone management and two observations of firm’s financial performance independently (i.e., current and future performance). The second study in this thesis focuses on firms that meet or just beat an earnings benchmark (JMBE). It examines whether JMBE employ tone management in the earnings conference call to complement earnings management. It also examines whether the audience tone in JMBE fails to predict future performance than other firms. The results of the first study show that the managerial tone in the earnings conference call reflects the firm’s current and future performance. This suggests that managerial tone is informative source about financial performance. In other words, it is used to signal information about financial performance, which will accordingly reduce the information asymmetry between managers and stakeholders. In the further analysis in the first study, it is shown that audience tone in the earnings conference call is positively associated with future performance, suggesting that audience tone is in line with managerial tone in signalling information to help users to predict future earnings. The results of the second study show that JMBE and engage more in earnings management are more likely to disclose abnormal tone during the earnings conference call in order to conceal the earnings management techniques that have been used to just beat or meet the earnings benchmark. This evidence suggests that earnings and tone management in JMBE are complementary strategies used for impression management purposes. The results also show that audience tone in JMBE is less likely to predict future performance. This supports the argument that the audience perception in such firms is successfully obfuscated by managers’ tone.

Item Type:Thesis (PhD)
Thesis Supervisor:Yang, J. and Zhou, D.
Thesis/Report Department:Henley Business School
Identification Number/DOI:
Divisions:Henley Business School > Business Informatics, Systems and Accounting
ID Code:94953

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