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Tone disclosure and financial performance: evidence from Egypt

Author

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  • Doaa Aly
  • Sherif El-Halaby
  • Khaled Hussainey

Abstract

Purpose - This paper aims to examine the extent to which financial performance (FP) represents one of the main determinants for tone disclosure (TD) in Egyptian annual reports. The authors also measure the bidirectional relationship between TD and FP. Design/methodology/approach - The manual content analysis is used to measure the levels of TD in annual reports for a sample of 105 firms listed on the Egyptian stock market. The sample covers a three-year period (2011-2013). Findings - The descriptive analysis in this paper shows that Egyptian firms disclose more good news than bad news. Therefore, the net news disclosure, or net variances, between good/bad is positive. The empirical analysis shows a positive association between the narrative disclosure of good/bad news and FP based on return on assets. The authors also find a highly significant association between the auditor, profitability, leverage, firm growth and financial reporting of good/bad news information. Finally, the results of the ordinary least squares regression show that the causality between the two endogenous variables runs from FP to TD. Thus, TD is determined by FP. Originality/value - This study offers a novel contribution to disclosure studies by being the first study to examine TD in one of the developing countries.

Suggested Citation

  • Doaa Aly & Sherif El-Halaby & Khaled Hussainey, 2018. "Tone disclosure and financial performance: evidence from Egypt," Accounting Research Journal, Emerald Group Publishing Limited, vol. 31(1), pages 63-74, May.
    • Handle: RePEc:eme:arjpps:arj-09-2016-0123
    DOI: 10.1108/ARJ-09-2016-0123
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    Citations

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    Cited by:

    1. Noha Elberry & Khaled Hussainey, 2021. "Governance Vis-à-Vis Investment Efficiency: Substitutes or Complementary in Their Effects on Disclosure Practice," JRFM, MDPI, vol. 14(1), pages 1-16, January.
    2. Sri Ningsih & Iman Harymawan & Nurul Fitriani & Brian Lam, 2021. "Pessimistic Tone in Earnings Announcement and CSR Disclosure: Exploring the Interacting Role of CEO Busyness," Sustainability, MDPI, vol. 13(24), pages 1-19, December.
    3. Mushtaq, Rizwan & Gull, Ammar Ali & Shahab, Yasir & Derouiche, Imen, 2022. "Do financial performance indicators predict 10-K text sentiments? An application of artificial intelligence," Research in International Business and Finance, Elsevier, vol. 61(C).
    4. Binh Thi Hai Le & Cong Van Nguyen, 2024. "Studying the impact of profitability, bankruptcy risk, and pandemic on narrative tone in annual reports in an emerging market in the East," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    5. Imen Derouiche & Riadh Manita & Anke Muessig, 2021. "Risk disclosure and firm operational efficiency," Annals of Operations Research, Springer, vol. 297(1), pages 115-145, February.
    6. Gehan A. Mousa & Elsayed A. H. Elamir & Khaled Hussainey, 2022. "Using machine learning methods to predict financial performance: Does disclosure tone matter?," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(1), pages 93-112, March.
    7. Fahad Alrobai & Maged M. Albaz, 2024. "Capturing Disclosure Tone in Saudi Arabia: Do Earnings Management and Accounting Conservatism Matter?," Sustainability, MDPI, vol. 16(14), pages 1-18, July.
    8. Mohammed Adel Elzahaby, 2023. "Corporate narrative disclosure practices in the Middle East and North Africa (MENA) region: a systematic literature review," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 296-315, September.
    9. Javid Iqbal & Khalid Riaz, 2022. "Predicting future financial performance of banks from management’s tone in the textual disclosures," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(4), pages 2691-2721, August.
    10. Khaldoon Albitar & Tony Abdoush & Khaled Hussainey, 2023. "Do corporate governance mechanisms and ESG disclosure drive CSR narrative tones?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3876-3890, October.

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