This chapter provides an overview of studies in finance and economics that use automated textual analysis algorithms to analyze the informational content of a wide variety of texts, including journalist’s coverage of news events, management-issued statements, and Internet stock message boards. In these studies, researchers quantify qualitative information with one or more of the following textual tone variables: textual negativity, positivity, and uncertainty. The studies show that textual negativity and positivity conveyed by managers and journalists helps predict future firm level and aggregate economic activity. Textual negativity and positivity, in turn, affect asset prices, although the information is sometimes incorporated with some delay. Textual uncertainty of management-issued information is associated with future cash flow volatility and asset price volatility. In contrast, the textual tone of stock market message board postings is, on average, not very informative in explaining asset prices. The use of automated textual analysis algorithms in finance and economics is a relatively new phenomenon and research in this area is expected to continue to grow.
When a dozen new countries joined the European Union in the mid-2000s, political tensions spiked over disparities in corporate income tax rates. Since the time of enlargement, leaders have tried repeatedly to enhance corporate tax coordination within the EU, as a result of fears of downward pressure on corporate tax rates and states’ weakening ability to collect revenues. At the same time, leaders from new member states in Eastern Europe with low corporate tax rates have contended that regional efforts to coordinate tax policies are not worthwhile, given that corporate tax competition is a global phenomenon. This article argues that corporate tax competition is more acute at the regional than the global level. While corporate tax rates are falling inside and outside the EU, we demonstrate using a large multiyear, multiregional data set that Eastern European countries have extremely low corporate tax rates relative to other EU and non-EU countries, even when controlling for multiple domestic economic and political factors. These findings support the potential efficacy of pursuing regional corporate tax reform to address the downward spiraling of rates in the EU.
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