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Management's tone in MD&A disclosure and investment efficiency: Evidence from China

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  • Zhou, Weihua
  • Li, Yuanjie
  • Wang, Deli
  • Xueqin, Du
  • Ke, Yishun

Abstract

We explore whether the management's tone in the Management Discussion & Analysis (MD&A) can predict the firm's investment efficiency in emerging markets. Using a dataset of Chinese listed firms from 2010 to 2021, we find that the more positive tone in MD&A disclosure is associated with the higher investment efficiency and the results still hold after a battery of robust tests. In addition, we find that the positive association between management’ tone in MD&A disclosure and investment efficiency is more particularly pronounced for non-state-owned firms, firms with more media coverage and firms in higher competition industry. Overall, our evidence highlights the importance of the quality of qualitative disclosures in improving investment efficiency.

Suggested Citation

  • Zhou, Weihua & Li, Yuanjie & Wang, Deli & Xueqin, Du & Ke, Yishun, 2024. "Management's tone in MD&A disclosure and investment efficiency: Evidence from China," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s154461232301139x
    DOI: 10.1016/j.frl.2023.104767
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    References listed on IDEAS

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    1. Wei, Fang & Yan, Siyao & Su, Daan & Zhang, Minyuan, 2024. "Management tone and corporate social responsibility: Evidence from Chinese listed companies' involvement in rural revitalization," Finance Research Letters, Elsevier, vol. 65(C).

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