Firm performance, reporting goals, and language choices in narrative disclosures

H. Scott Asay, Robert Libby and Kristina Rennekamp

Journal of Accounting and Economics, 2018, vol. 65, issue 2, 380-398

Abstract: We use an experiment with experienced managers to provide more-direct evidence on how reporting goals and firm performance influence language choices. We find that bad news disclosures are less readable than good news, but only when managers have a stronger self-enhancement motive. Our results suggest that this difference is driven mainly by attempts to write more readable good news reports as opposed to intentional obfuscation of poor performance. In order to frame poor performance in a positive light, managers also focus more on the future, provide causal explanations for poor performance, and use more passive voice and fewer personal pronouns.

Keywords: Textual analysis; Readability; Narrative disclosure language; Causal explanation (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:65:y:2018:i:2:p:380-398

DOI: 10.1016/j.jacceco.2018.02.002

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