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
Citation
CHEN, Wen; WU, Haibin; and ZHANG, Liandong.
Terrorist attacks, managerial sentiment, and corporate disclosures. (2021). Accounting Review. 96, (3), 165-190.
Available at: https://ink.library.smu.edu.sg/soa_research/1837
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2308/TAR-2017-0655