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Are performance explanations credible or strategic? Evidence from a large sample of MD&As1

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dc.contributor.authorGong, Sabrina
dc.contributor.authorHao, Yamin
dc.contributor.authorWang, Xiaojia
dc.date.accessioned2025-03-14T15:51:59Z
dc.date.available2025-03-14T15:51:59Z
dc.date.issued2024
dc.description.abstractThis paper examines managers’ explanations of firm performance (i.e., management attributions) in a large sample of the Management's Discussion and Analysis (MD&A) section of annual reports. We find that managers of poorly performing firms tend to attribute firm performance to external factors. We further propose a prediction model to decompose management external attributions into a credible part and a strategic part and find that both components are negatively related to firm performance. This evidence suggests that management external attributions partially reflect the actual impact of external conditions on firm performance and are not entirely subject to managerial opportunism. Additionally, we find that investors react more strongly to firm performance when managers provide credible external attributions, especially for firms without a bad reputation for strategic external attributions. We also show that executive compensation is less sensitive to firm performance when managers make more strategic external attributions.
dc.identifier.citationGong, S., Hao, Y., & Wang, X. (2024). Are performance explanations credible or strategic? Evidence from a large sample of MD&As1. The Journal of Corporate Accounting & Finance, 35(3), 241–258. https://doi.org/10.1002/jcaf.22707
dc.identifier.doihttps://doi.org/10.1002/jcaf.22707
dc.identifier.urihttps://hdl.handle.net/20.500.14078/3828
dc.language.isoen
dc.rightsAttribution-NonCommercial-NoDerivs (CC BY-NC-ND)
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subjectexecutive compensation
dc.subjectfirm performance
dc.subjectmanagement
dc.subjectattributions
dc.subjectmarket reaction
dc.subjecttextual analysis
dc.titleAre performance explanations credible or strategic? Evidence from a large sample of MD&As1en
dc.typeArticle

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