The predictive ability of corporate narrative disclosures: Australian evidence

Malcolm Smith, Yinan Dong and Yun Ren

Asian Review of Accounting, 2011, vol. 19, issue 2, 157-170

Abstract: Purpose - The purpose of this paper is to investigate the relationship between narrative disclosures and corporate performance based on Australian evidence. In particular it builds a model which discriminates between good and poor performing companies based on their corporate narratives. Design/methodology/approach - A sample of Australian manufacturing companies is classified into two groups based on earnings per share (EPS) movement between 2008 and 2009. A content analysis of their discretionary narrative disclosures is used to classify and predict group membership. Findings - This study finds that the word‐based variables based on discretionary disclosures are significantly correlated with corporate performance. Word‐based variables can successfully classify companies between “good” performers and “poor” performers with an accuracy of 86 percent. Research limitations/implications - The relatively small sample size, for Australian manufacturing companies, limits both the predictive ability of the model and its generalisability elsewhere. Practical implications - The findings of the paper demonstrate that certain keywords, notably the use of “high/highest” and “dividends” are significantly and positively associated with superior performance. Originality/value - The study builds a classification model for continuing Australian companies, whereas prior research focuses on UK and US companies and is based on a healthy/failed distinction.

Keywords: Australia; Manufacturing industries; Narratives; Disclosure; Corporate narratives; Content analysis; Readability (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:arapps:v:19:y:2011:i:2:p:157-170

DOI: 10.1108/13217341111181087

Access Statistics for this article

Asian Review of Accounting is currently edited by Prof. Haiyan Zhou

More articles in Asian Review of Accounting from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().