Repetitive Disclosures in the MD&amp;A

Li, Heather

doi:10.2139/ssrn.2924193

Cited by 14 publications

(21 citation statements)

References 72 publications

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“…Prior research indicates textual analysis can offer valuable insight into firm activity (Agarwal et al, 2016;Loughran & McDonald, 2011Zhao, 2016), especially when applied to MD&A sections (Cole & Jones, 2004;Cho & Muslu, 2021;Durnev & Mangen, 2020;F. Li, 2010b;H. Li, 2019;Mayew et al, 2014;Pava & Epstein, 1993).…”

Section: Introductionmentioning

confidence: 99%

Do changes in MD&A section tone predict investment behavior?

Berns

Bick

Flugum

et al. 2021

The Financial Review

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We find that changes in managerial tone predict firm corporate investment activities. Tone changes within the Management Discussion and Analysis section of the 10-K are positively related to subsequent capital investments and M&A activity. We find the predictive content of tone changes to be present at the firm and industry-levels, and when accounting for alternative sources of incremental information associated with firm investment activities. Our findings broaden the scope of information encapsulated by changes in financial statement tone.

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Section: Introductionmentioning

confidence: 99%

Do changes in MD&A section tone predict investment behavior?

Berns

Bick

Flugum

et al. 2021

The Financial Review

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“…The report should only include the most important financial and non-financial business indicators ( § 289 I, III HGB). In line with this notion, Li (2019) finds that disclosures in the MD&A section are informative for shareholders even when the information is repeated in other parts of the annual report. Based on survey evidence in Lee and Tweedie (1975), 51.5 per cent of shareholders read the chairman's statement thoroughly, while 34.2 per cent do not read the notes at all (Lee and Tweedie 1975, p. 281).…”

Section: Empirical Strategymentioning

confidence: 71%

When do firms highlight their effective tax rate?

Flagmeier

Mueller

Sureth-Sloane

2021

Accounting and Business Research

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This study examines GAAP effective tax rate (ETR) visibility as a distinct disclosure choice in firms' financial statements. By applying a game-theory disclosure model for the voluntary disclosure strategies of firms, in a tax setting, we argue that firms face a trade-off in their ETR disclosure decisions. On the one hand, firms have an incentive to enhance their ETR disclosure when the ratio offers shareholders 'favourable conditions', for example, higher expected after-tax cash flows. On the other hand, the disclosure of a favourable low ETR could attract the attention of tax auditors and the public and ultimately result in disclosure costs. We empirically test disclosure behaviour by examining the relation between disclosure visibility and different ETR conditions that reflect different stakeholder-specific costs and benefits. While we find that unfavourable ETR conditions are not highlighted, we observe higher disclosure visibility for favourable ETRs (smooth, close to the industry average, and decreasing ETRs). Additional analyses reveal that this high visibility is characteristic of firm years with only moderately decreasing ETRs at usual ETR levels, while extreme ETRs are not highlighted. Interestingly and in contrast to our main results, a subsample of family firms does not seem to highlight favourable ETRs.

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“…Jacob and Schütt (2020) . In line with this notion, Li (2019) finds that disclosures in the MD&A section are informative for shareholders even when the information is repeated in other parts of the annual report. Based on survey evidence in Lee and Tweedie (1975), 51.5 per cent of shareholders read the chairman's statement thoroughly while 34.2 per cent do not read the notes at all (Lee and Tweedie 1975, p. 281).…”

Section: Hypothesis Developmentmentioning

confidence: 71%

When Do Firms Highlight Their Effective Tax Rate?

2020

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Acknowledgements: We thank the participants of the 2013 arqus Doctoral Workshop and participants at the 2018 European Accounting Association conference for their valuable comments on an earlier version of this paper. We are grateful to the Baetge research team for sharing the annual report quality data and thank Fabian Peitz and Isis Swoboda for excellent research assistance. We gratefully acknowledge funding provided by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation)-Project-ID 403041268-TRR 266.

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Repetitive Disclosures in the MD&A

Cited by 14 publications

References 72 publications

Do changes in MD&A section tone predict investment behavior?

Do changes in MD&A section tone predict investment behavior?

When do firms highlight their effective tax rate?

When Do Firms Highlight Their Effective Tax Rate?

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