A1303
Title: Managers positive facial expressions and earnings quality
Authors: Wuqing Wu - Renmin University of China (China) [presenting]
Zhenhan Hong - Renmin Universiity of China (China)
Abstract: The relationship between one measure of managers' positive facial expressions and the earnings quality of listed companies is examined. Videos of the annual performance presentations at the Shanghai Roadshow Center are downloaded, and an open-source neural network model is used to analyze the intensity of facial muscle movement associated with smiling. It is found that managers' expression of positivity correlates with less accrued earnings manipulation. This relationship is more pronounced in companies that adjust their accrued earnings upward. Overall, a new measure of the positivity of facial expressions based on neuropsychological theories is constructed, and it is shown that it could be significant nonverbal information for stakeholders to assess firms' performance. Future research could apply this approach in more situations since videos are becoming an increasingly important means of disseminating information.
