Publication Type

Journal Article

Version

acceptedVersion

Publication Date

7-2021

Abstract

This study investigates the effect of managerial sentiment on corporate disclosure decisions. Using terrorist attacks in the United States as adverse shocks to managerial sentiment, we find that firms located in the metropolitan areas attacked issue more negatively biased earnings forecasts. The effect is stronger for firms with higher operating uncertainty and firms with younger, inexperienced, or less confident executives and it is weaker for firms located in states with increasing violent crime rates. A potential alternative explanation is that managers could strategically bias earnings forecasts downward and attribute the poor performance to terrorist attacks. To address this issue, we conduct a battery of additional analyses and the results are more consistent with managerial sentiment than strategic attribution. In addition, we show that our results are unlikely driven by any economic effects of terrorist attacks. Finally, firms in the attacked areas also exhibit a more pessimistic tone in 10-K/10-Q filings.

Keywords

disclosure, behavioral bias, management forecast, sentiment, terrorist attacks

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Accounting Review

Volume

96

Issue

3

First Page

165

Last Page

190

ISSN

0001-4826

Identifier

10.2308/TAR-2017-0655

Publisher

American Accounting Association

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.2308/TAR-2017-0655

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