Non-Investor Stakeholders and Earnings Benchmarks

dc.contributor.advisorKimbrough, Michael D.en_US
dc.contributor.authorWei, Sijingen_US
dc.contributor.departmentBusiness and Management: Accounting & Information Assuranceen_US
dc.contributor.publisherDigital Repository at the University of Marylanden_US
dc.contributor.publisherUniversity of Maryland (College Park, Md.)en_US
dc.date.accessioned2017-06-22T06:12:05Z
dc.date.available2017-06-22T06:12:05Z
dc.date.issued2017en_US
dc.description.abstractABSTRACT A firm has numerous non-investor stakeholders, such as customers, employees, and potential business partners, who provide needed monetary and nonmonetary support to the firm. In Essay One, I provide empirical evidence on the previously untested theoretical prediction that these stakeholders’ views of a firm depend on its ability to meet relevant earnings benchmarks. Using published and proprietary reputation scores to capture stakeholder perceptions, I find in both levels and changes analyses that non-investor stakeholder perceptions are positively associated with a firm’s ability to beat relevant earnings benchmarks and that the relevant earnings benchmark for each stakeholder group varies based on the nature of its claim. Specifically, customer perceptions are positively associated with a firm’s ability to meet the profit benchmark. Potential business partner perceptions are positively associated with a firm’s ability to meet both the analyst forecast benchmark and the earnings growth benchmark. Employee perceptions are positively associated with a firm’s ability to meet the earnings growth benchmark. These findings highlight broader uses of and broader audiences for accounting information than previously documented. In Essay Two, I examine whether and how firms consider their non-investor stakeholders when prioritizing which earnings benchmarks to meet or beat. Using a sample of publicly traded firms from 1990 to 2015, I identify which non-investor stakeholder group (i.e. consumers, employees, or potential business partners) is most critical to a firm based on a stakeholder dependency score, which measures the extent to which a firm relies on a particular stakeholder group. I find that, regardless of which non-investor stakeholder group is most critical to the firm, firms beat the analyst forecast benchmark several times more frequently than they beat other benchmarks. Because the analyst forecast is the most important benchmark to the capital market, this finding indicates that managers place greater weight on investors’ preferences than on the preferences of their non-investor stakeholders when deciding which earnings benchmarks to meet or beat. Thus, capital market pressure appears to dominate the pressure from non-investor stakeholders. However, I also find that consumer-focused (employee-focused) firms meet or beat the profit benchmark (the increase benchmark) more often than non-consumer-focused firms (non-employee-focused firms) when the profit benchmark (the increase benchmark) is the most difficult to beat or when pre-managed earnings falls short of the associated benchmark. These results indicate that firms are more likely to meet or beat the specific earnings benchmark that is most relevant to a particular non-investor stakeholder group when that non-investor stakeholder group is most critical to the firm. These findings contribute to a better understanding of how managers incorporate non-investor stakeholders’ preferences in their decisions about which earnings benchmarks to meet or beat.en_US
dc.identifierhttps://doi.org/10.13016/M2KW0W
dc.identifier.urihttp://hdl.handle.net/1903/19433
dc.language.isoenen_US
dc.subject.pqcontrolledAccountingen_US
dc.subject.pqcontrolledEconomicsen_US
dc.subject.pqcontrolledManagementen_US
dc.subject.pquncontrolledCorporate Reputationen_US
dc.subject.pquncontrolledEarnings Benchmarksen_US
dc.subject.pquncontrolledHeuristicsen_US
dc.subject.pquncontrolledImplicit Claimsen_US
dc.subject.pquncontrolledNon-Investor Stakeholdersen_US
dc.titleNon-Investor Stakeholders and Earnings Benchmarksen_US
dc.typeDissertationen_US

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