Managers’ use of language in corrupt firms’ financial disclosures: Evidence from FCPA violators
Author(s)
Author(s)
Jaeschke, R.
Lopatta, K.
Date Issued
2018
Publisher
Elsevier
Journal
Scandinavian Journal of Management
Volume
34
Issue
2
Start page
170
End page
192
Abstract
This paper explores management’s use of language in financial disclosures of corrupt firms by looking at a sample of firms that have been prosecuted for violating the Foreign Corrupt Practices Act (FCPA). We find that the management of FCPA violators use more negative, less litigious, more complex and less conservative language when disclosing financials than non‐violators. The language effect prior to an FCPA prosecution is driven by firms with low corporate governance performance. By contrast, firms with high corporate governance use less complex and more conservative language before an FCPA prosecution than firms with low corporate governance performance. Furthermore, we find that after an FCPA prosecution the language becomes less litigious and complex than before the FCPA litigation.
SFU Affiliated Publication
No
Availability at SFU Library
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