Can Non-Punitive Supervision Restrain the Management's Tone Manipulation? Empirical Evidences Based on Annual Report Texts

Abstract

Abstract: The governance effect of inquiry letter supervision in stock exchanges on non-financial textual information has aroused little research focus. By making use of the data of China's A-share non-financial listed companies from 2015 to 2019, this paper empirically tests the impact of the supervision of the financial report inquiry letters in the stock exchanges on the management's tone manipulation and its mechanism. The results show that the financial report inquiry letters can effectively restrain the management's tone manipulation, and the more the letters received by the company, the more significant the impact will be. When the characteristics of the inquiry letters are distinguished, the results show that the more the number of questions involved in the inquiry letters, the more the risky matters, the more continuous receipt of letters, and the more names of the accounting firms being called, the more significant the restraint on the management's tone manipulation will be. The results of a mechanism test show that the financial report inquiry letters can restrict the management's tone manipulation mainly through the“regulatory supplementary effect”and the“market pressure effect”. Further research reveals that the governance effect of financial report inquiry letters on the management's tone manipulation will spill over to the auditing-related enterprises positively and to the director-related enterprises negatively.

Key words: financial report inquiry letter, management's tone manipulation, text analysis, spillover effect

CLC Number:

F276.6

FU Wen-bo, ZENG Hao. Can Non-Punitive Supervision Restrain the Management's Tone Manipulation? Empirical Evidences Based on Annual Report Texts[J]. Contemporary Finance & Economics, 2022, 0(3): 89-101.

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