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Does managerial tone matter for stock liquidity? Evidence from textual disclosures

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  • Dang, Man
  • Puwanenthiren, Premkanth
  • Nguyen, Manh Toan
  • Hoang, Viet Anh
  • Mazur, Mieszko
  • Henry, Darren

Abstract

This study investigates the effect of managerial tone on stock liquidity using a sample of U.S.-listed firms over the 1994–2019 period. We find that firms with SEC filings exhibiting more positive managerial tone experience higher stock liquidity. Our findings remain unchanged after controlling for firm fixed effects, investor sentiment, firm size differences and using alternative variable approaches. Further, we identify that the relationship is less pronounced during times of high policy uncertainty measured by EPU and presidential elections. Overall, this paper provides evidence that the management tone in SEC filings has price discovery and efficiency implications for investor trading decisions.

Suggested Citation

  • Dang, Man & Puwanenthiren, Premkanth & Nguyen, Manh Toan & Hoang, Viet Anh & Mazur, Mieszko & Henry, Darren, 2022. "Does managerial tone matter for stock liquidity? Evidence from textual disclosures," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s154461232200188x
    DOI: 10.1016/j.frl.2022.102917
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    References listed on IDEAS

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    Cited by:

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    2. Liu, Benjamin & Johl, Shireenjit & Lasantha, Ruwan, 2023. "ESG scores and cash holdings: The role of disciplinary trading," Finance Research Letters, Elsevier, vol. 55(PA).
    3. D’Augusta, Carlo & De Vito, Antonio & Grossetti, Francesco, 2023. "Words and numbers: A disagreement story from post-earnings announcement return and volume patterns," Finance Research Letters, Elsevier, vol. 54(C).
    4. Liu, Guangqiang & Liu, Boyang, 2023. "How digital technology improves the high-quality development of enterprises and capital markets: A liquidity perspective," Finance Research Letters, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Management tone; Textual disclosures; Stock liquidity; Policy uncertainty;
    All these keywords.

    JEL classification:

    • 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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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