Abstract
This thesis, titled "The Impacts of Tax Strategies, Auditor Characteristics, and Social Media on Accounting Information Quality," conducts a comprehensive investigation into the effects of tax strategies, auditor characteristics, and social media within the realm of financial reporting. This thesis comprises three distinct essays, each addressing a specific facet of corporate conduct, as well as its implications for the quality of accounting information.The first study (Chapter 2) explores the relationship between tax avoidance strategies and accounting comparability. Utilizing raw and industry-adjusted effective tax rates as proxies for tax avoidance, the analysis reveals a substantial reduction in accounting comparability for firms adopting more aggressive tax avoidance practices. This impact is particularly pronounced for firms employing tax planning strategies beyond industry norms. Moreover, when using an alternative measure of accounting comparability based on pre-tax income, the study consistently observes evidence of the detrimental effects of tax avoidance behavior. Crucially, this evidence suggests that the influence of aggressive tax planning extends beyond reported tax expenses, affecting the comparability of the entire financial reporting system. The results of this research have implications not only for investors and analysts trying to assess and compare companies but also for the broader understanding of the costs associated with aggressive tax planning.
The second study (Chapter 3) shifts focus to the consequences of auditor characteristics, specifically the influence of audit partner narcissism in a sample of UK firms. The study discerns an increased likelihood of auditors to tolerate clients' earnings management as narcissism levels rise among auditors. Interestingly, audit partner narcissism does not exhibit a significant correlation with the issuance of low-quality audit opinions, as assessed through modified audit opinions and misstatements. These findings diverge from prior research in Chinese and Taiwanese settings, aligning with the argument that culture may play a pivotal role in shaping the effects of auditor personality traits on auditing practices. Moreover, the study observes a reduction in audit fees charged for each client with higher levels of audit partner narcissism, accompanied by an enhanced capacity to attract more listed clients and generate higher revenues at the portfolio level. This study enhances our understanding of cross-country differences in the effects of individual personal traits. It, furthermore, sheds light on how narcissistic auditor partners navigate the balance between maximizing revenues and maintaining the quality of their opinions.
The third study (Chapter 4) investigates the impact of social media, specifically opinions posted on Seeking Alpha, on the enhancement of a firm's information environment and the formulation of managerial voluntary disclosure strategies. The empirical evidence demonstrates that managers are more inclined to disclose non-GAAP earnings measures in circumstances of lower social media coverage. However, the mitigating effect of a more negative tone and the presence of false information on social media on the negative association between social media coverage and non-GAAP disclosures is highlighted. These findings support the notion that managers strategically use non-GAAP disclosure to mitigate information uncertainty and counteract negative media pressure. Further analysis indicates that firms with larger Seeking Alpha coverage deliver non-GAAP earnings of higher quality, signifying the monitoring role of social media in influencing managerial decisions. Despite indications of opportunistic non-GAAP disclosure, investors perceive non-GAAP information as more credible when firms are exposed to higher levels of social media attention.
Overall, the findings from these three studies contribute to the existing body of literature on the multifaceted influences shaping accounting information quality. By exploring a range of factors that impact the reliability and precision of accounting information disclosed, this research could hold implications for scholars, practitioners, regulators and policymakers.
| Date of Award | 13 Nov 2024 |
|---|---|
| Original language | English |
| Awarding Institution |
|
| Supervisor | Pietro Perotti (Supervisor) & Dimitrios Gounopoulos (Supervisor) |