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From morale to metrics: The influence of workforce engagement on financial reporting choices
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Ayishat Omar 
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This study investigates the relationship between employee engagement and discretionary accruals, offering a stakeholder-oriented perspective on earnings management. Using panel data from U.S. public firms (2017–2024) and the Drucker Institute’s employee engagement and development score, the study estimates regression models to assess whether engagement influences revenue reporting discretion. Results show that higher employee engagement is associated with lower discretionary accruals, indicating that engagement functions as a governance mechanism that promotes transparency rather than opportunistic reporting. The effect is stronger in consumer-facing industries, where reputational visibility and stakeholder scrutiny are greatest, but it is not moderated by firm growth. These findings extend stakeholder theory by demonstrating that non-financial performance indicators can shape financial reporting behavior and highlight the contextual nature of reputational pressures. Practical implications include the need for regulators, auditors, and investors to consider engagement metrics as indicators of reporting quality. Future research should examine interactions with other stakeholder attributes and institutional contexts.
Keywords: Employee Engagement, Discretionary Accruals, Stakeholder Theory, Financial Reporting Transparency, Reputational Pressure
Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.
Declaration of conflicting interests: The Author declares that there is no conflict of interest.
JEL Classification: D22, G34, J53, M14, M41
Received: 09.11.2025
Revised: 09.01.2026; 21.01.2026
Accepted: 06.02.2026
Published online: 10.02.2026
How to cite this paper: Omar, A. (2026). From morale to metrics: The influence of workforce engagement on financial reporting choices. Corporate Ownership & Control, 23(1), 41–51. https://doi.org/10.22495/cocv23i1art4
