Empirical Research Of Self-serving Attribution Tendency In Annual Report Of Public Companies

With years of reform and opening up in China’s economic development, securities market is gradually on the way to standardization and mature. More and more issues, however, are exposed in financial annual reports, the focus of public concerns, by some existing factors. Nowadays, either nationally or internationally, exposed financial fraud scandals triggered research and discussion in academic circle and business interests. In this highly information-based society, accounting management and its generated information play a critical role in capital market and economic policy-making. As the old saying:an error, the breadth of a single hair, can lead you a thousand li astray. On the contrary, for preventing financial risk of capital market, promoting enterprise’s economic efficiency and accelerating our economy, we should intensify accounting management at the first place on both the macro and micro level,In this21st century, that the development of information determines the growing and dying of enterprises already spreads to every corner of daily life. As one of these things, the proportion of language information disclosure is growing gradually. For this reason, whether the management use language information disclosure to manipulate annual reports on purpose and influencing investors or stakeholders is a crucial decision to make. For better guidance, intensive study of self-serving attribution of language information in financial annual reports of public companies is of great need.The quality of information from public companies determines the efficiency of resource allocation. Information asymmetry inside and outside gives insiders an advantage for private gain. Since national capital market has been founded, it must have happened a million times that the management layer of public enterprises uses its advantage of information for personal benefits. Such untrue financial reports will make a great economic damage to investors and dent their confidence.Meanwhile, the blossom of joint-stock company leads a brand new market for information disclosure. Public companies are the provider as well as disclosures, and investors and stakeholders are information receivers as well as users. In this case, financial reports, products of the brand new market, are ties that bind providers and users. Financial reports provide financial position, operating result, potential cash flow and the other information, helping relevant parties to evaluate all the indexes, including credit quality, profitability, liquidity, management performance, corporate profit and comprehensive profitability etc. Undeniably, growing proportion of language information in financial reports is the trend in recent years. What insiders manipulate is not only data, but more is language information. Unlike digital data which could be restrained by regulations and law, language information could be manipulated insensibly with the congenial damages.Under this circumstance, western impression management theory was introduced into research of language disclosure quality. In this theory, superintendents are declared to artificially manipulate language information on purpose during the process of preparing external reports. This artificial manipulation is classified under self-serving attribution behavior. The objective to manipulate language information is to leave superintendents with better image after reading reports and make future decisions closer to or convergent on the interest orientation of company administrators. There are six chapters in the thesis, and the logical relation could be explored as below:Chapter1IntroductionThis chapter is an overview of background, framework, method and significance. The trend that language information weighs more and more in financial annual reports of public enterprises offers administrators an opportunity to manipulate language information with their information advantage. These nondata information is more covert and insensible. Moreover, compare with numerical information, language information has a more flexible way of reporting and receive an easier treatment from audit department. Being similar to western countries, except financial statement notes, the rest of language information is not subjects to independent audit. And also, the format of disclosing language information of external financial reports is under control of superintendents. That lays down the self-serving attribution activities from management layer of public enterprises. Taking advantage of self-serving attribution, administrators attribute great performance to their management ability and efficiency, but ascribe poor performance to external factors. It leads to the main idea of my thesis. Whether the self-serving attribution behavior exist in national public companies, and whether it rises to the surface during the glory period and the bad time.Chapter2Theoretical foundation and literature review.Theoretical foundation comes from principal-agent theory, impression theory and self-serving attribution theory. From principal-agent theory, the concepts of adverse selection, signaling information asymmetric and moral hazard build the foundation of self-serving attribution theory. The separation of owners and operators differentiates their benefits. This is the root causes of self-serving attribution of language information we were trying to identify in public companies. In this research, the language information which does not fit the theory and method of digital information research any more needs a new way. Originating from psychology, impression management theory has been introduced into a lot of fields. This thesis is designed for studying the self-serving attribution behaviors of management layer and analyzing personal internal thinking and external actions. In this thesis, impression management theory is necessary for studying personal internal pattern of administrators. From self-serving attribution theory, people do not always ascribe their actions to external environment. Attributing their behaviors to external surroundings or internal quality depends on the nature of their actions. More specifically, positive results would be attributed to personal quality, but negative performance would be ascribed to external factors. The second part is national and international literature review of self-serving attribution.Chapter3Theoretical analysis and research hypothesisTheoretical analysis consists of three aspects. First, the phenomenon that self-serving attribution behaviors exist in public companies of China is admitted. Then, the influence of information will be analyzed with self-serving attributions. Finally, the motive of self-serving attribution actions will be analyzed. Moreover, there are two parts in research hypothesis. One is making assumptions of self-serving attribution on different enterprises. This part only selects the financial annual reports of A-share market in Shanghai because the comparison of annual style and content between companies in the same market will be more meaningful. The other is self-serving attribution analysis of one enterprise in different periods and performance. That is analyzing whether the self-serving attribution behaviors exist in companies in vertical way, which more fully proves the generality of self-serving attribution actions.Chapter4Empirical research of self-serving attribution tendency under different performance.As mentioned before, the comparison of style and content in financial annual reports will be more meaningful in the same market. Therefore, the financial reports of A-share market in Shanghai are set as the data range of research. The sample was screened into two groups:good and poor performance. More specifically, the first step is identifying120companies with highest and lowest earning per share change rate. And then re-filter60companies which have the highest and lowest earning per share change rate in2009and2010from those120ones as the analytic samples. Based on researches and methods of our predecessors, it is concluded that the tendency of self-serving attribution does exist in financial annual report of national public companies in A-share market of Shanghai. In the conclusion, enterprises would prefer to attribute great performance to internal management, but ascribe poor results to external environment.Chapter5Empirical research of self-serving attribution tendency of one company in different fiscal year.The tendency will be more apparent if performances in different financial years are grouped in good and poor. Under this circumstance, the data of2008,2009and2010was divided into "good-to-poor" and "poor-to-good". The process of screening samples is so strict that the range of screening samples is expanded to A-share market of Shanghai and Shenzhen. Referenced on theories of predecessors, conclusions are as follows:behaviors of manipulating performance surely exist in national financial annual reports. Influenced by self-serving attribution tendency, moreover, the process of preparing external reports drifts language information too far from objectivity.Chapter6The conclusion—theoretical limitation and further ideaAs the last chapter of this paper, it connects literature review, theoretical analysis and empirical research mentioned before, makes a conclusion on the whole and provides a lot of proposal from the sight of government, enterprises, market and regulators.Through synthesis comparative analysis, conclusions are as follows:The tendency of self-serving attribution is proven in financial annual reports of public companies in Shanghai and Shenzhen.Among different companies in the same fiscal year, enterprises with great performance tend to have internal advantages, but ones with poor performance incline to have external issues.In one company, different performance will be attributed to different aspects. Firstly, the "poor-to good" performance companies have less internal and more external attribution behaviors in bad time than in glory period. Secondly, the "good-to-poor" performance companies have more internal and less external attribution actions in good time than poor period.Innovative points of this thesis are as follows:The limited researches in this field restrict the reference resource. In chapter4, it is the first time at home to use the recent annual figures of public companies in Shanghai into the empirical research of self-serving attribution tendency is activated in their different performance periods. This research process and conclusion can offer beneficial reference and ideas in further study, and simultaneously cover the shortages of this fresh field.In empirical analysis part, the conclusions of former references came from related data analysis. Based on empirical research, however, my thesis studies specific cases during data processing for offering a more clear point to readers, and details the step for providing a more persuasive conclusion.The last but not the least, there are still some points imperfect and limited.First, further optimization should be expected on the method of assignment operation of attribution tendency. Second, with reinforcement in regulations and standardization of accounting reports, there will be a more unified line of action to study language information disclosure, which leads results closer to actuality and accuracy. Moreover, after some great events or changes in economics, analysis of environmental variation in whole industry will be aroused. Under such circumstance, the research of self-serving attribution will obtain a more fascinating theory in a newer and better angle. Because of the limited knowledge my thesis might have some questionable opinions which need to be discussed further. Therefore, thank you in advance for offering honest criticisms and critiques.