Does earnings management affect linguistic features of MD&A disclosures?

Samit Paul and Prateek Sharma

Finance Research Letters, 2023, vol. 51, issue C

Abstract: Earnings management literature considers high disclosure complexity as indicative of obfuscation. We argue that this singular focus on disclosure complexity can be misleading as managers adopt other obfuscation strategies too to conceal earnings management. We examine several alternative obfuscation strategies using a sample of 67,649 management discussion and analysis (MD&A) disclosures of US firms from 1994 to 2020. We find that managers obfuscate not only by increasing the disclosure complexity but also by omitting negative information, reducing information content, and projecting confidence about the state of the business. Robustness tests suggest that our findings are robust to potential endogeneity concerns.

Keywords: Obfuscation; Readability; Lexical diversity; Sentiment; Uncertainty (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S154461232200530X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s154461232200530x

DOI: 10.1016/j.frl.2022.103352

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().