 Forward‐Looking Statements and Investor TradingJing‐Chi Chen, Pankaj K Jain and Sabatino (Dino) Silveri Journal of Business Finance & Accounting, 2026, vol. 53, issue 1, 77-106 Abstract: We conduct textual analysis on 10‐K and 10‐Q filings and find that forward‐looking statements (FLS) associate with reductions in investor trading costs, driven largely by reductions in market‐maker inventory costs. FLS also associate with increases in market depth on both sides of the bid–ask spread and increases in both retail and institutional investor trading activity. Importantly, retail investors are more responsive to FLS than institutional investors. Cross‐sectional tests provide additional evidence with the associations being more pronounced during market downturns and in the absence of earnings guidance. The results are robust to instrumental variable regressions using managerial ability as an instrument. Overall, our results suggest that FLS reduce trading frictions mainly by reducing market‐maker inventory costs, increasing market‐maker competition via increased market depth and increasing investor trading activity, particularly from retail investors. Our results thus highlight the important role FLS play in trading activity, especially for retail investors. Date: 2026 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:53:y:2026:i:1:p:77-106 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker More articles in Journal of Business Finance & Accounting from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.