Specifically, managers with low accounting knowledge are more likely to withhold information if the cause of the unfavorable performance is due to internal factors. Nevertheless, this situation does not apply to managers with high accounting knowledge who tend to issue future earnings information regardless of the internal or external factor. This study hypothesizes that managers with high accounting knowledge will realize the importance of future earnings information and its relevance to the decision of market participants.
In contrast, managers with low accounting knowledge will be less likely to disclose their unfavorable future earnings due to the lack of market expectations. This study also predicts that accounting knowledge may reduce managers' bias when assessing future earnings disappointments. H1: Given the unfavorable future earnings, managers with high accounting knowledge are more likely to disclose management earnings forecasts than managers with low accounting knowledge.
The current study expects that managers with high accounting knowledge are more likely to issue profit forecasts because they are aware of the importance of full and fair disclosure of information that is relevant to the decision-making processes of capital market participants. Managers with high accounting knowledge are expected to be aware of their accountability to various parties who use accounting information to make important decisions. In contrast, managers with low accounting knowledge are expected to over-attribute unfavorable results to internal causes.
Research Methodology 1 Participants
Thus, with high accounting knowledge, the likelihood of deriving earnings forecasts among such individuals should be strong, regardless of intrinsic or extrinsic attributes. Thus, less knowledgeable managers who are biased toward internal attribution are less likely to issue disappointing earnings forecasts than those with external attribution bias (and low accounting knowledge). H3: Given unfavorable future earnings, the difference between the likelihood that managers with low and high accounting knowledge will forecast management earnings is greater under internal attribution than under external attribution.
The descriptive statistics shown in panel B indicate that those from the low knowledge group completed an average of 2.75 accounting courses and those in the high accounting knowledge group completed 10.15 accounting courses (p = 0.00). However, the number of finance and business strategy courses is insignificantly different between the low and high accounting knowledge groups (p = 0.20 and p . = 0.19, respectively). The results thus indicate that the MBA and MACC participants differ only in their accounting knowledge.
The average work experience between the two groups of participants – the group with low accounting knowledge (6.52 years) and the group with high accounting knowledge (6.21 years) also differed non-significantly (p = 0.39). The questionnaire contains eight questions that focus on the effects of disclosing (or omitting) earnings forecasts. 2 Seventy percent of participants with low accounting knowledge have a non-business undergraduate degree (eg, engineering, psychology, pharmacy, etc.) and no work experience in accounting.
Both groups have sufficient knowledge of management's earnings forecasts which helped them to perform their tasks. The additional information describes the rationale behind management's earnings forecasts (attribution manipulation), analysts' consensus forecasts and last quarter's actual earnings (constant figures for earnings benchmark) and the company's disclosure policy, which emphasizes financial transparency and good corporate governance. Participants are assumed to hold positions as CEOs and have decision-making authority to disclose or withhold information about management earnings forecasts.
They are then handed the first envelope (Envelope 1), which contains one of two attribution-based case materials (internal and external attribution), with questions about the likelihood of announcing management's earnings forecasts. Previous behavioral research (Bonner, 1990; Bonner & Lewis, 1990; Libby & Luft, 1993) in accounting has focused on the effects of accounting knowledge and years of work experience on performance in the accounting environment.
Results
Panel B shows that the effect of the attribution on the probability of disclosure of management's earnings expectations is insignificant (p = 0.34). In Table 2, panel B shows that the joint effect of accounting knowledge and self-serving attributions is marginally significant (p = 0.07). Panel C shows the one-way ANOVA contrast test results between the attributions (internal and external) and low and high accounting knowledge.
Under internal attribution, the mean responses are 6.33 and 8.31 for the low and high accounting knowledge groups, respectively (p = 0.00, one-tailed). Under the external attribution, the mean responses are 7.59 and 7.92 for the low and high accounting knowledge groups, respectively (p = 0.30, one-tailed). Recalling that this study focuses on accounting knowledge and years of work experience and their impact on the individual's performance in completing accounting tasks, an ANCOVA test is conducted to mitigate this confounding effect.
The test is conducted using accounting knowledge and attributions as the independent variables, years of work experience as a covariate, and the probability of issuing management earnings forecast as a dependent variable. However, the effect of years of work experience on the likelihood of issuing a management earnings forecast is not significant (p = 0.29). These results suggest that after controlling for years of work experience, the effect of accounting knowledge confirms the main results.
The low accounting knowledge group exhibits a significantly lower concern for forecast accuracy than the high accounting knowledge group (p = 0.02, one-tailed). In contrast, the market expectations and reputation constructs are insignificantly different between the low and high accounting knowledge groups (p = 0.34 and 0.15, one-tailed, respectively). Disclosure decisions between low and high descriptive accounting knowledge – mean (Standard Deviation) and planned comparisons.
As a result, this study also conducts an additional test to examine the effect of self-interest and accounting knowledge on the likelihood of issuing a longer-term (half-year) management earnings forecast. The untabulated results suggested that accounting knowledge and attributions do not have a significant effect on the extended forecast horizon (F-statistic = 1.16, p = 0.33).
Discussion and Implications
Prior research (Nelson, 1993; Rose & Rose, 2008) has shown that an individual's accounting knowledge affects their judgment and ability to perform accounting-related tasks, and the outcome of this study certainly supported the proposition that accounting knowledge benefits voluntary disclosure decisions. . This study also provides evidence showing the effect of selfish attribution on management judgment and disclosure decisions. This study also provides evidence that JDM is unaffected by causal attribution.
Focusing on the interactive effects of accounting knowledge and allocation, this study finds that these factors together affect a manager's willingness to release earnings forecasts. Specifically, the effect of self-serving attribution bias on the probability of issuing management earnings forecasts depends on the manager's level of accounting knowledge. On the other hand, managers with low accounting knowledge, when faced with an external cause of future earnings failures, are more willing to disclose their future earnings failures because they can attribute the earnings failures to the external cause.
However, self-serving attribution bias does not appear to have the same effect on high accounting knowledge managers. In this regard, the likelihood of managers with high accounting knowledge to issue future earnings information in the presence of either the internal or external factors remained intact. Even though the effects of the internal and external causes could not be equally weighted, based on the individual's perception (Miller & Ross, 1975), the outcome of this study extends previous findings, in that the impact of self-serving attribution bias happens wash. on the individual's background knowledge.
The level of accounting knowledge helps mitigate the self-serving attribution bias, so that managers with high accounting knowledge are less likely to attribute bad results to internal causes. Therefore, the findings of this study contribute to existing attribution literature by zooming in on the relationship between accounting knowledge and self-serving attribution, both of which can be applied to make voluntary disclosure decisions. Previous behavioral literature (Libby & Luft, 1993) in accounting suggested that more accounting knowledge and more years of work experience contribute to better decision making in accounting tasks.
In addition, this study also examines the effects of accounting knowledge and self-serving attribution on the likelihood of issuing a long-term (i.e., half-year) managerial earnings forecast. The results also show that accounting knowledge and self-interested attribution have no significant influence on the extended forecast horizon.
Conclusions and Limitations
Future research could explore whether managers with high accounting knowledge or a stronger background produce more accurate earnings forecasts or introduce less bias into earnings forecasts. To warn or not to warn: Management disclosures in the face of an earnings surprise. The effects of accounting knowledge on missing value-added information in wealth measurement and allocation decisions.
Effects of accounting knowledge and context on opportunity cost forgone in resource allocation decisions. A management earnings forecast is a voluntary management disclosure that relates to a company's expected performance before actual performance is announced. We Electronics Public Company Limited (hereinafter referred to as "We Electronics" or the "Company") is a leading manufacturer and distributor of electronic components.
We Electronics' business has grown steadily over the past five years and its shares are traded on the Stock Exchange of Thailand (SET). The Forecast Department has provided you with information on the 2017 First Quarter (Q1 2017) earnings forecast for your consideration. The quarterly earnings forecast is estimated based on financial models that include historical earnings patterns and other information.
The financial consultant believes that the estimated earnings for the first quarter of 2017 will be realized at the 95 percent confidence level. Due to the company's continuous historical growth and interest from investors, We Electronics has attracted a following from certain financial analysts. The analysts have a positive view of the company's growth, and the analysts' consensus earnings per share (EPS) forecast for the first quarter of 2017 is 1.10 baht.
The company expects earnings per share (EPS) for the first quarter of 2017 to be below last quarter's actual earnings, which can largely be attributed to the company's marketing initiatives. The company expects earnings per share (EPS) for the first quarter of 2017 to be below last quarter's actual profit, which can largely be attributed to its main competitor's new marketing activities. Based on the above information about We Electronics Public Company Limited, please answer the following questions.
Please respond with a slash (/) on the indicated line that best describes your thought or opinion.
