Linguistic Complexity in Firm Disclosures: Obfuscation or Information?

Bushee, Brian J.; Gow, Ian D.; Taylor, Daniel J.

doi:10.2139/ssrn.2375424

Cited by 61 publications

(110 citation statements)

References 38 publications

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“…We find that both positive and negative tone dispersion are negatively associated with the readability of the conference call, providing mixed evidence of an association between obfuscation and tone dispersion. This finding is consistent with the observation that reduced readability can be either strategic or informative (Li [2008], Bushee, Gow, and Taylor [2014]). On the whole, our results suggest that tone dispersion is associated with strategic reporting decisions.…”

Section: Tone Dispersion and Characteristics Of Firm Disclosuressupporting

confidence: 91%

The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion

Allee

DeAngelis

2015

J of Accounting Research

213

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We examine tone dispersion, or the degree to which tone words are spread evenly within a narrative, to evaluate whether narrative structure provides insight into managers’ voluntary disclosures and users’ responses to those disclosures. We find that tone dispersion is associated with current aggregate and disaggregated performance and future performance, managers’ financial reporting decisions, and managers’ incentives and actions to manage perceptions. Furthermore, we find that tone dispersion is associated with analysts’ and investors’ responses to conference call narratives. Our results suggest that tone dispersion both reflects and affects the information that managers convey through their narratives.

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Section: Tone Dispersion and Characteristics Of Firm Disclosuressupporting

confidence: 91%

The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion

Allee

DeAngelis

2015

J of Accounting Research

213

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“…Whereas analysts' work may appear anodyne in schemaconsistent settings, they nevertheless respond with more penetrating research when actual 5 performance deviates from expectations generally, and in particular when performance is worse than predicted. Second, we contribute to research on earnings conference calls (Hollander et al, 2010;Matsumoto et al, 2011;Larcker and Zakolyukina, 2012;Mayew and Venkatachalam, 2012;Brochet et al, 2015;Bushee et al, 2015;Davis et al, 2015;Lee, 2016). 2 Direct evidence on the properties of analysts' questions is sparse and limited to assessments of their pooled predictive ability and response to management tone (Allee and DeAngelis, 2015;Brockman et al, 2015;Chen et al, 2015;Milian and Smith, 2015).…”

Section: From Conference Call Questions and Research Notes Introductionmentioning

confidence: 99%

Does equity analyst research lack rigour and objectivity? Evidence from conference call questions and research notes

Salzedo

Young

El-Haj

2016

Accounting and Business Research

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Tel ++44 (0) 1524 594242; Email s.young@lancaster.ac.uk. We are grateful for very helpful comments from two anonymous reviewers whose suggestions significantly improved the paper. Comments and suggestions were also provided by Kathleen AbstractDoubts have been raised about the rigour and objectivity of sell-side analysts' research due to institutional structures that promote pro-management behaviour. However, research in psychology stresses the importance of controlling for biases in individuals' inherent cognitive processing behaviour when drawing conclusions about their propensity to undertake careful scientific analysis. Using social cognition theory, we predict that the rigour and objectivity evident in analyst research is more pronounced following unexpected news in general and unexpected bad news in particular. We evaluate this prediction against the null hypothesis that analyst research consistently lacks rigour and objectivity to maintain good relations with management. Using U.S. firm earnings surprises as our conditioning event, we examine the content of analysts' conference call questions and research notes to assess the properties of their research. We find that analysts' notes and conference call questions display material levels of rigour and objectivity when earnings news is unexpectedly positive, and that these characteristics are more pronounced in response to unexpectedly poor earnings news. Results are consistent with analysts' innate cognitive processing response counteracting institutional considerations when attributional search incentives are strong. Exploratory analysis suggests that studying verbal and written outputs provides a more complete picture of analysts' work.

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“…Recent advances in text analysis software have opened a line of inquiry in the accounting literature, focusing on evaluating the linguistic characteristics of firm's reporting. Existing research has suggested that firms may strategically manage disclosure "readability" (Bushee, Gow, Taylor, 2015;Li, 2008) and uncovered specific patterns related to the readability of corporate reports. In particular, poorly performing firms tend to obfuscate the presentation of information, whereas well-performing firms make more straightforward disclosures (Li, 2008;Lang and Lundholm, 1993;Newman and Sansing, 1992).…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…We therefore expect that the scores generated by such an intermediary reflect the content of voluntary reports. Drawing on recent accounting literature that documents linguistic characteristics of firm reporting (Bushee, Gow, Taylor, 2015;Li, 2008), including the "readability" of such reports, we also expect that the scores of the intermediary will be influenced by the linguistic attributes of firms voluntary reports.…”

Section: Introductionmentioning

confidence: 99%

Voluntary Disclosure and Information Intermediaries: Evidence from the Carbon Disclosure Project

Fabrizio

Kim

2016

AMPROC

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Investors, customers, and other stakeholders rely on the information disclosure by firms to evaluate numerous dimensions of the firm's operations and potential for future profitability. As environmental performance has become increasingly important to customers and investors, intermediaries have developed to fill the void left by the lack of standardized or required reporting and help alleviate the information asymmetry between firms and stakeholders. The ability of these intermediaries to provide accurate and useful information depends on the strategic disclosure of information and reporting by firms. In this paper, we examine one of the largest and most influential intermediaries, the Carbon Disclosure Project, to examine how the contents and the linguistic characteristics of the firm's survey response determines the CDP scoring, and whether the CDP scores are informative to predict subsequent environmental performance.

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Linguistic Complexity in Firm Disclosures: Obfuscation or Information?

Cited by 61 publications

References 38 publications

The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion

The Structure of Voluntary Disclosure Narratives: Evidence from Tone Dispersion

Does equity analyst research lack rigour and objectivity? Evidence from conference call questions and research notes

Voluntary Disclosure and Information Intermediaries: Evidence from the Carbon Disclosure Project

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