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Beyond cheap talk: management's informative tone in corporate disclosures

Author

Listed:
  • Maoliang Li
  • Huiying Wu
  • Min Xiao
  • Jiaxing You

Abstract

This study investigates the information content of Management Discussion and Analysis (MD&A) reports of listed Chinese companies. We develop a Chinese word dictionary and measure the tones of MD&As. Our results indicate that tone is positively associated with future earnings and is particularly useful when a firm's future prospect is uncertain, accounting information is difficult to understand, or board monitoring is strong. Further analyses show that tone also predicts future cash flow, future sales growth, market reactions, analysts’ revisions, and institutional investors’ shareholdings. Together, we provide robust evidence that in emerging markets such as China, management tone conveys valuable information beyond cheap talk.

Suggested Citation

  • Maoliang Li & Huiying Wu & Min Xiao & Jiaxing You, 2019. "Beyond cheap talk: management's informative tone in corporate disclosures," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(5), pages 2905-2959, December.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:5:p:2905-2959
    DOI: 10.1111/acfi.12554
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    Cited by:

    1. Changling Sun & Zixi Zhang & Marek Vochozka & Iveta Vozòáková, 2022. "Enterprise digital transformation and debt financing cost in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 783-829, September.
    2. Baochen Yang & Yifang Liu & Yunpeng Su, 2023. "Earnings communication conferences and post‐earnings‐announcement drift: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2145-2185, June.
    3. Liu, Eping & Qin, Haoyuan, 2024. "Can managers’ facial expressions predict future company performance and risk? Evidence from China," Finance Research Letters, Elsevier, vol. 59(C).
    4. Jie Gao & Huiying Wu & Jiaxing You & Meg Smith, 2021. "Migrant entrepreneurs and firm innovation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(5), pages 6069-6112, December.
    5. Chang, Liang & Tan, Na & Zhang, Xinyue & Yuan, Yiyun, 2023. "Does peer firms’ tone affect corporate investment? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    6. Changling Sun & Ziang Lin & Marek Vochozka & Zuzana Vincúrová, 2022. "Digital transformation and corporate cash holdings in China’s A-share listed companies," Oeconomia Copernicana, Institute of Economic Research, vol. 13(4), pages 1081-1116, December.
    7. Bassyouny, Hesham & Abdelfattah, Tarek & Tao, Lei, 2022. "Narrative disclosure tone: A review and areas for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    8. Zheyuan Zhang & Huiying Wu & Sammy Xiaoyan Ying & Jiaxing You, 2023. "Corporate Innovation and Disclosure Strategy," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 76-133, March.
    9. Li, Zhengda & Zheng, Chengxin & Liu, Aimin & Yang, Yang & Yuan, Xiaoling, 2022. "Environmental taxes, green subsidies, and cleaner production willingness: Evidence from China's publicly traded companies," Technological Forecasting and Social Change, Elsevier, vol. 183(C).

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