Date of Award


Degree Name

Doctor of Philosophy


College of Business


David M. Folsom


In this study, I investigate the existence of direct ethics-related cheap talk in 10-Ks. Firms can utilize ethics-related language in 10-Ks to emphasize the importance of ethics or ethical behaviors. Direct ethics-related language in corporate financial disclosures may increase the stakeholdersâ?? expectation that firms act ethically. However, ethics-related language in 10-Ks shows cheap talk characteristics since it is qualitative, unaudited, not binding, and not costly to generate. As a result, firms may increase the extent of direct ethics-related language in 10-Ks to obfuscate corporate financial disclosures to confuse stakeholders. I focus on regulatory and financial pressure sources to understand ethics-related cheap talk in 10-Ks. For regulatory pressure, I investigate direct ethics-related language in non-reliance ("Big R") restatement firms to test the direct ethics-related cheap talk in 10-Ks. I document that firms use more direct ethics-related language in 10-Ks during non-reliance restatement periods and in the year of restatement filing, mainly when the future restatement is triggered by excessive firm misbehavior such as fraud. I also examine whether firms under financial performance pressure increase direct ethics-related language. I show a significant increase in direct ethics-related language for firms that marginally missed analyst EPS forecasts and are incentivized to manage their small losses to small profits. Finally, I investigate the obfuscation component of financial reporting complexity for the firms that increase direct ethics-related language in 10-Ks. I document that when firms with greater ability to obfuscate through ethical language employ more ethics-related language, they, on average, report less decision-useful earnings. These findings show that firms use ethics-related cheap talk in 10-Ks to appear more ethical and signal positive ethics-related signals to the stakeholders to alleviate adverse reactions to negative news, especially under severe regulatory and financial pressure sources.




Recieved from ProQuest

File Size


File Format


Rights Holder

Sedat Erdogan

Included in

Accounting Commons