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Financial Reports and Social Capital

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  • Anand Jha

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.

Suggested Citation

  • Anand Jha, 2019. "Financial Reports and Social Capital," Journal of Business Ethics, Springer, vol. 155(2), pages 567-596, March.
    • Handle: RePEc:kap:jbuset:v:155:y:2019:i:2:d:10.1007_s10551-017-3495-5
    DOI: 10.1007/s10551-017-3495-5
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    More about this item

    Keywords

    Financial fraud; Social capital; Financial report; Discretionary accruals; Real earnings management; Fog index;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G3 - Financial Economics - - Corporate Finance and Governance

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