AAA Spark Meeting of the Regions

The Impact of the COVID-19 Pandemic on Tone of Narrative Disclosure and Earnings Management of Japanese Firms Applying IFRS

• In Event: Managerial Influence on Reporting Quality

Abstract

This study examines whether the COVID-19 pandemic has affected the textual characteristics of disclosures by Japanese firms applying IFRS and whether the COVID-19 pandemic affected the association between tone and abnormal accruals in the disclosures. The findings are the following: First, Japanese firms applying IFRS have more distinctive terms during the COVID-19 pandemic, and COVID-19 has made the disclosures longer in length and more negative in tone. Although IFRS applying Japanese firms are forced to perform worse due to the COVID-19 pandemic, they can blame the environment for their poor performance, and managers can reduce their earnings management during the COVID-19 pandemic. However, it is still evident that both before and during the COVID-19 pandemic, firms are implementing earnings and tone management simultaneously. Firms are highly likely to implement earnings management to conceal such earnings management.

Author

• Masumi Nakashima, Bunkyo Gakuin University