Deciphering the Influence of the Tone of Management Discussion and Analysis on Corporate Innovation: Integrating Textual Analysis

Qingyuan Wu, William Barnett, Xue Wang and Junru Zhao
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Qingyuan Wu: School of Economics and Management, Hanshan Normal University, Chaozhou, China.
Xue Wang: Department of Economics, Emory University, Atlanta, GA, U.S. and Institute of Chinese Financial Studies, Southwestern University of Finance and Economics, Chengdu, China
Junru Zhao: School of Business Administration, Guizhou University of Finance and Economics, Guiyang, Guizhou 550025, China.

No 202417, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: How does Management's Discussion and Analysis (MD&A) sentiment tone affect corporate innovation? The influence mechanism is straight and very robust. To some extent, the positive sentiment tone, representing a psychological state, serves as an intermediary between macro or micro conditions and corporate innovation. This paper uses a machine learning method to measure the MD&A sentiment tone and get innovation indicators in a broader sense. The fix effect model shows that when the value of a firm's positive sentiment tone increases by 1 unit, its innovation increases by approximately 1.02 units. Eliminating industry and market effects, the exclusive sentiment tone information owned by the firm would still play a strong influence on innovation.

Keywords: Discussion and analysis sentiment tone; Corporate innovation; Text analysis; Listed companies (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-big
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