Topic: MD&A Disclosures, Management Reporting Credibility and Investment Decisions
Presenter：Bernard Wong-On-Wing, Professor，Department of Accounting， Washington State University
Time: October 26, 2007（Friday）3：00—4：30 PM
Venue: Room 513, Jiageng Bld 2
Chair： Yujun Wu, assistant professor in finance, IFAS
Abstract：
Prior research provides limited and inconsistent evidence regarding the usefulness of the MD&A. This study proposes and tests a model of investors’ use of information contained in the MD&A. The results suggest that the clarity of MD&A disclosures and the use of safe harbor statements jointly influence non-professional investors’ perception of management’s reporting credibility. In particular, in the absence of safe harbor statements, non-professional investors infer that management has higher reporting credibility when MD&A disclosures are clear than when they are unclear. However, when management uses safe harbor statements, non-professional investors infer relatively high reporting credibility regardless of the clarity of the MD&A disclosures. The results also suggest that non-professional investors’ perceived reporting credibility moderates the effect of management’s forecast on investment decisions. Specifically, the favorable effect of a positive management forecast in the MD&A is observed only when management’s reporting credibility is perceived to be high, but not when it is perceived to be low. Implications are discussed.
Presenter Introduction：vita
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