Headline Impression Management in the Earnings Press Releases of TSX Venture Exchange Firms*

This paper explores firms traded on the Toronto Stock Exchange (TSX) Venture Exchange and their voluntary disclosure practices by focusing on earnings press releases (EPRs). We compare the characteristics of EPR issuers and non-issuers and investigate how the former group uses headline impression management in their EPRs to highlight firm performance. More precisely, we examine emphasis and tone management techniques in the headlines of over 1,300 EPRs by TSX Venture Exchange (TSX-V) firms. Our results show that the main determinants of the EPR disclosure choice are the achievement of positive revenue, an increasing trend in firm market value, and industry type. We find that EPR issuers reinforce and repeat positive results in the headlines of EPRs and use positive tone management to highlight positive financial performance. Our results confirm the association between firm performance and strategic placement of performance results, while illustrating that the strength of this association varies by industry and by EPR characteristics such as EPR length and numerical intensity. Overall, this paper sheds light on TSX-V firms, their disclosure practices, and potential violations of recommendations from regulators regarding avoiding exaggerated or promotional language in press releases.     

Promoting remote workers' psychological health: Effective management practices during the COVID-19 crisis

The aim of this study was to identify specific management practices that promote the psychological health of remote workers in the context of the COVID-19 crisis. A two-round Delphi study was conducted among 28 teleworkers and 22 managers. A list of 60 specific management practices was presented and participants had to identify whether each one could be used in the current remote working context and, if so, how useful it was to promote psychological health at work. Results indicate that most specific management practices usually used in a face-to-face setting can also be used in a remote context (85%). Practices that show consideration, establishing work structure, and allowing flexibility were also identified as the most useful to promote remote workers' psychological health during the pandemic. This study contributes to the advancement of knowledge about specific management practices, remote working, and crisis management. It also suggests specific practices that managers can adopt to promote the psychological health of their employees during a period of crisis, even while managing from a distance.     

A Canadian Response to the Pursuit of Global Sustainability Reporting Standards*

As business, government, and society continue to emphasize the importance of sustainability—both of individual organizations and of the natural world—accounting standard-setting bodies want to be part of the process. In September 2020, in response to “urgent and growing demand” for more “consistent and comparable” sustainability reporting, the IFRS Foundation (the Foundation) released for comment a Consultation Paper on Sustainability Reporting. In the paper, the Foundation proposed the creation of a Sustainability Standards Board (SSB), which it would oversee alongside the IASB. The SSB would become, de facto, the global sustainability reporting standard setter. The Foundation received 577 responses to its proposal. These responses came from around the world and from a wide range of stakeholders. Thirty-eight of the responses came from Canada. This study profiles the Canadian responses, contrasting them with the wider set of worldwide responses. Some uniquely Canadian features include user responses from a large number of pension funds and preparer responses solely from the energy sector. There was also a significant response from the Canadian accounting community, including from the full set of Canadian standard-setting organizations. Five auditors general also responded. Overall, Canadian respondents supported both globalized sustainability reporting standards and the Foundation's creation of the SSB. This support aligns Canada's response with the worldwide response.     

Motivating Employees with Goal-Based Prosocial Rewards*

A recent trend in organizations is to motivate employees with goal-based prosocial rewards, whereby employees must donate their rewards to charities upon goal attainment. We examine the motivational effects of goal-based prosocial rewards versus cash rewards under different levels of goal difficulty. We develop our hypotheses based on affective valuation theory, which posits that when valuing uncertain outcomes by affect rather than calculation, individuals are largely insensitive to changes in probability of the outcomes, including probability of goal attainment. Experiment results support our hypotheses. Specifically, we find that employees who are rewarded with prosocial (vs. cash) goal-based rewards are more likely to adopt an affective valuation approach. Consequently, when employees are assigned either an easy goal or a stretch goal, their effort is higher when incentivized with a goal-based prosocial reward than a cash reward. Furthermore, there is a less curve-linear relationship between goal difficulty and effort with prosocial (vs. cash) goal-based rewards. These findings highlight for incentive system designers the motivational advantage of goal-based prosocial rewards relative to traditional cash rewards. Furthermore, we extend the academic literature by showing how affect-rich rewards such as prosocial rewards can influence employees' assessment of the probability of goal attainment.     

When Do Firms Adjust Bonus Targets Intrayear? Evidence from Sales Executives' Targets*

This study investigates when and why intrayear bonus target revisions occur. This is important as intrayear target revisions occur regularly in practice but are not well understood. Specifically, we analyze two potential drivers of intrayear bonus target revisions: reduced managerial incentives owing to managers dropping out of the incentive zone of their piecewise defined bonus function and potential spillovers from planning target revisions that reflect changes in performance expectations during the year. We also investigate the effects of organizational characteristics on intrayear bonus target revisions. Using data collected from sales executives via multiple waves of surveys, we find evidence for both predicted drivers. In addition, consistent with our predictions, we find that the levels of delegated decision authority, intrafirm interdependencies, and information asymmetry negatively moderate the positive association between reduced managerial incentives and revision likelihood. Our paper contributes to the target setting literature by being the first study to investigate intrayear bonus target revisions and shed light on when firms commit to not revising such targets intrayear.     

Managerial Myopia,Earnings Guidance,and Investment*

This study investigates the real effects of management communication, specifically of forecasts or earnings guidance, on investment. Managers can signal the strength of their projects through accuracy in their earnings guidance. This leads less accurate managers to distort their investments; the equilibrium investment strategy involves over-investment when earnings exceed the forecast and under-investment when earnings fall short. Moreover, we find that managers are pessimistic in their forecasts, which helps to explain the corresponding well-documented empirical regularity. This downward bias increases the likelihood of investment manipulation but decreases the real loss from distortion. Interestingly, the over-investment induced by earnings guidance helps to mitigate the classic under-investment problem for a myopic manager with unobservable investment. Earnings guidance can therefore be value-increasing when managerial myopia is severe.     

Enhancing Students' Enabling Competencies: Student Perspectives and Recommendations for Educators*

Employers continue to express concern that accounting graduates lack the necessary competencies when they enter the workplace. These concerns have been addressed in part by periodic revisions to Chartered Professional Accountants of Canada's (CPA Canada) CPA Competency Map, which is used to define competencies for entry into the profession. The CPA Competency Map has recently been revised to include a new set of enabling competencies (often called generic or soft skills). However, the accounting literature highlights a concern that time and resources spent on the expanding set of enabling competencies could take valuable resources away from teaching technical accounting skills. In addition, the education literature indicates that student motivation plays a key role in learning. If students are motivated to learn enabling competencies, then educational efforts could be more efficient and effective. Conversely, a lack of student motivation could reduce student engagement and learning. To address these concerns, we investigated the student's perspective on the importance of enabling competencies as well as on how and where enabling competencies should be learned. We surveyed 380 students enrolled in the CPA Canada Professional Education Program (PEP). We investigated the three new enabling competencies that are most distinct from the previous set of competencies and that may be the most difficult for accounting educators to teach: adaptability and resilience; creativity and innovation; and active listening. We asked students about the importance of these new enabling competencies for their future careers and whether the competencies should be taught in PEP or in the workplace. Our results indicate that students believe that the new enabling competencies are important and should be learned in both the classroom and the workplace. Moreover, student responses to open-ended questions provide educators with suggestions on how to incorporate enabling competencies into the classroom by blending activities that could simultaneously enhance enabling competencies with technical competencies.     

Ted's Teas: A Two-Part Accounting and Audit “Crossover Case”*

This fictional case is based on a real specialty tea company in Nova Scotia. Ted's Teas is a two-part crossover case that illustrates the integration of financial accounting and audit learning outcomes applied to real-world scenarios. In Part 1, students assume the role of an internal accountant and apply knowledge of the Chartered Professional Accountants (CPA) of Canada's CPA Way to identify how to treat leases, changes in policy, and estimates as part of accounting knowledge under both Accounting Standards for Private Enterprises and IFRS frameworks. In Part 2, students “cross over” and change roles, so they are now external auditors for Ted's Teas, tasked to provide an analysis of risk of material misstatement, recommend an audit approach, and develop substantive procedures. This two-part case presents opportunities for students to demonstrate technical competence in multiple areas, either separately in two different courses or combined in one “capstone” or case course. The case and teaching notes, including the marking rubrics, were adapted from principles used to train and evaluate CPA Professional Education Program candidates, tailored to an appropriate level for undergraduate and graduate learners.     

Why Can't I Trade? Exchange Discretion in Calling Halts*,†

Stock exchanges are important intermediaries in how firm information enters price. Trading halts are a key tool, often exercised at the exchanges' discretion, to prevent extraordinary price volatility when new information arrives. We investigate how exchanges use discretion and whether the discretion alters the effectiveness of the halts. We provide evidence consistent with halts reflecting the preferences of listed firms rather than the stated exchange objectives (i.e., minimizing excess volatility and off-equilibrium trades). Furthermore, when exchanges exercise more discretion (unexplained by firm and information characteristics), the halts are less effective. Specifically, halts with more discretion are less likely to resume trading with efficient prices and are more likely to have been called unnecessarily (i.e., little to no price movement during the halt). These findings are consistent with exchanges using halts to cater to listed firms rather than to meet exchange objectives such as minimizing excess volatility or avoiding trades at off-equilibrium prices.     

Mitigating the Influence of Analysts Who Issue Aggressive Stock Price Targets: The Role of Joint Versus Separate Evaluation*

Investors frequently rely on individual analysts' stock price targets. Aggressive price targets often reflect analysts' attempts to strategically influence investors. Therefore, investors' welfare may be compromised if they take aggressive price targets at face value. In this study, we examine conditions under which investors are more likely to infer that analysts who issue aggressive price targets are acting strategically. Investors can evaluate multiple analysts' price targets with or without other related information (e.g., earnings estimates). Investors can also evaluate the information provided by multiple analysts jointly or separately one analyst at a time. Two experiments find that as predicted, when investors evaluate multiple analysts' price targets without earnings estimates, there is no difference in investors' perceptions about whether the aggressive analyst is acting strategically across joint versus separate evaluation. However, also as predicted, when investors evaluate multiple analysts' price targets along with their earnings estimates, investors perceive the aggressive analyst as acting more strategically under joint evaluation than under separate evaluation. Our findings suggest that jointly evaluating multiple analysts' price targets with other related information, such as earnings estimates, can reduce the likelihood that investors would be overly influenced by aggressive analysts.