The Impacts of Management’s Tone Change on Market Reaction and Future Performance
Date Issued
2012
Date
2012
Author(s)
Lai, Jia-Yun
Abstract
This study explores whether the annual report has incremental information content. It uses content analysis to classify words into positive and negative sentiment to measure the negative tone change in annual report relative to prior filing. Its results indicate that when the negative tone change increases (decreases), the short window market reactions around the releasing of annual report would significantly decrease (increase). The drift returns are also significantly negatively related to the negative tone change. This study also finds the negative tone change could predict firm’s future performance. The increase (decrease) of negative tone change could predict worse (better) future performance. In the test of information environment, the incremental information of management’s negative tone change depends on the number of analyst forecasts.
Subjects
tone change
annual report
content analysis
narrative information
earning prediction
earning drift
Type
thesis
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