Performance pressure and annual report text manipulation: Evidence from China

Yanxi Li, Delin Meng and Lan Wang

Business Ethics, the Environment & Responsibility, 2025, vol. 34, issue 4, 1382-1398

Abstract: Building on attribution theory, this study investigates the antecedents of corporate annual report text manipulation from the perspective of managerial performance pressure. Using a data set comprising 15,076 samples from companies listed on China's Shanghai and Shenzhen A‐share markets between 2009 and 2021, we reveal that as management faces performance pressure, they tend to increase content about external environmental risk and policy uncertainty in annual reports due to actor–observer bias. When incorporating Confucian cultural factors into the research framework, the study found that the strength of Confucian culture mitigates the correlation between the pressure of management performance and annual report manipulation. However, the level of marketization where a corporation is located can undermine the ethical norms upheld by Confucian culture. In additional analysis, we also discovered that the longer the duration of performance pressure, the greater the extent of manipulation within the annual reports initiated by the management. Interestingly, the social performance pressure generated from ESG performance also positively influences annual report textual manipulation, compared to operational performance pressure. This study explores the impact of management performance pressure on information disclosure decisions from the perspective of performance attribution, not only extending the boundaries of attribution theory but also providing guidance for policymakers to enhance the supervision of annual report disclosures and for capital market investors to optimize investment decisions.

Date: 2025
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https://doi.org/10.1111/beer.12716

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Persistent link: https://EconPapers.repec.org/RePEc:wly:buseth:v:34:y:2025:i:4:p:1382-1398

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