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The effect of language on income smoothing : cross-country evidence
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Cao, Wenjiao, Myers, Linda A. and Zhang, Zhifang (2024) The effect of language on income smoothing : cross-country evidence. Management Science . doi:10.1287/mnsc.2021.01753 ISSN 0025-1909. (In Press)
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Official URL: https://doi.org/10.1287/mnsc.2021.01753
Abstract
We examine whether and how the time-oriented tendency embedded in languages influences income smoothing. Separating languages into weak- versus strong-future time reference (FTR) groups, we find that firms in weak-FTR countries tend to smooth earnings more. We also find that relationships with major stakeholders (i.e., debtholders, suppliers, and employees) amplify the effect of the FTR of languages on income smoothing. Additional analyses suggest that income smoothing driven by the FTR of languages enhances earnings informativeness. These findings provide new insights on the role that language plays in financial reporting decisions and on how relationships with major stakeholders influence the relation between an important feature of language and corporate income smoothing behavior.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Corporations -- Language, Income smoothing, Stakeholder management, Financial statements, Wages | ||||||||
Journal or Publication Title: | Management Science | ||||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
ISSN: | 0025-1909 | ||||||||
Official Date: | 2024 | ||||||||
Dates: |
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DOI: | 10.1287/mnsc.2021.01753 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | In Press | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 17 May 2023 | ||||||||
Date of first compliant Open Access: | 17 May 2023 | ||||||||
RIOXX Funder/Project Grant: |
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