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Pessimistic Tone in Earnings Announcement and CSR Disclosure: Exploring the Interacting Role of CEO Busyness

Sri Ningsih (), Iman Harymawan (), Nurul Fitriani () and Brian Lam ()
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Sri Ningsih: Department of Accounting, Airlangga University, Surabaya 60115, Indonesia
Iman Harymawan: Department of Accounting, Airlangga University, Surabaya 60115, Indonesia
Nurul Fitriani: Department of Accounting, Airlangga University, Surabaya 60115, Indonesia
Brian Lam: Division of Business and Management, BNU-HKBU United International College, Zhuhai 519087, China

Sustainability, 2021, vol. 13, issue 24, 1-19

Abstract: This study analyzes the relationship between the pessimistic tone in earnings announcements and CSR disclosures interacted by CEO busyness. This study used 191 observations from 74 firms listed on the Indonesia Stock Exchange and the Global Reporting Initiative (GRI) database from 2016–2019. Grounded in signaling theory, we hypothesize that a pessimistic tone in earning announcements will increase CSR disclosure. We also hypothesize that busy CEOs strengthen this relationship. We use the ordinary least squares to analyze and answer our hypotheses. This study showed that the use of a pessimistic tone in the income statement in the discussion report and management analysis (MD&A) is related positively and significantly to CSR disclosure. This study also found that busy CEOs strengthen those relationships. Our implication is that CSR disclosure in our sample is only measured based on the information presented in the sustainability report. To the best of the authors’ knowledge, this study is the first to investigate the relationship between the pessimistic tone in earning announcements and CSR disclosures interacted by CEO busyness. In addition, this study provides insight into current performance disclosure practices in MD&A reports and CSR reports that managers can use to safeguard the firm’s reputation.

Keywords: pessimistic tone; earnings announcement; busy CEO; CSR disclosure; corporate sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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