Journal of Undergraduate Research


stakeholder attention, earnings quality, perceived expectations


Marriott School of Business




We behave differently when we are being watched. A large body of research finds that when observed, individuals are more likely to act in accordance with the perceived expectations or desires of the observer as a means to achieve a specific goal (e.g., positive appraisal, promotion, penalty avoidance, etc.).1 In the corporate space, prior studies provide considerable evidence on how attention or monitoring from various parties such as auditors, analysts, business press reporters, institutional investors, and debt holders affects the financial reporting choices of managers. The current literature finds almost unilateral evidence that increased attention from these outsiders is associated with higher quality financial reports (Becker et al., 1998; Sweeney, 1994; Chung et al., 2002; Dyck et al., 2008; Yu, 2008). We extend this literature by investigating how attention paid to the firm by a previously unexamined group of outsiders—its customers—impacts the aggressiveness of managers’ financial reporting choices.

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