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Market reaction to the positiveness of annual report narratives

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  • Yekini, Liafisu Sina
  • Wisniewski, Tomasz Piotr
  • Millo, Yuval

Abstract

This paper focuses on narratives published by UK companies, defined here as the content of annual reports excluding financial statements and notes to accounts. We endeavour to gauge the tone of these narratives by recording the frequency of positive words appearing in the text. We show that the extent of positiveness is related to market reaction around the disclosure date. This conclusion is maintained even after controlling for the financial figures that are reported simultaneously and company-specific characteristics. Consequently, narratives should not be perceived as mere impression management tools, but also as conduits for disseminating price-sensitive information.

Suggested Citation

  • Yekini, Liafisu Sina & Wisniewski, Tomasz Piotr & Millo, Yuval, 2016. "Market reaction to the positiveness of annual report narratives," The British Accounting Review, Elsevier, vol. 48(4), pages 415-430.
    • Handle: RePEc:eee:bracre:v:48:y:2016:i:4:p:415-430
    DOI: 10.1016/j.bar.2015.12.001
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    More about this item

    Keywords

    Annual report narrative; Content analysis; Stock market reaction;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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