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Financial Reports and Social Capital

Anand Jha ()

Journal of Business Ethics, 2019, vol. 155, issue 2, 567-596

Abstract: Abstract I examine social capital’s impact on financial reports. Based on the social capital literature, I predict that the quality of the financial reports is higher when a firm is headquartered in a region with high social capital. Consistent with this prediction, I find that the firms that are headquartered in this type of region in the USA have a lower probability of committing fraud by misrepresenting financial information. Further, I find that the firms in regions with high social capital have lower levels of discretionary accruals and much more readable annual reports.

Keywords: Financial fraud; Social capital; Financial report; Discretionary accruals; Real earnings management; Fog index (search for similar items in EconPapers)
JEL-codes: M14 M41 G3 (search for similar items in EconPapers)
Date: 2019
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