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Managers’ Use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus MD&A *

Managers’ Use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus... 1. Introduction Corporate financial disclosure consists of an integrated series of communications that can reduce information asymmetry and agency conflicts between a firm’s managers and its external stakeholders. Financial disclosures come in numerical and narrative forms and include both mandated reports and voluntary disclosures. Managers distribute disclosures via various communication outlets including press releases, conference calls, and Securities and Exchange Commission (SEC) filings. In developing an overall disclosure strategy, it is likely that managers consider the timing, form, and visibility of alternative disclosure outlets. Prior research provides evidence consistent with this claim and demonstrates that market participants respond not only to the content, but also to the timing and form of financial disclosures (e.g., Begley and Fischer 1998 ; Bagnoli, Kross, and Watts 2002 ; Sedor 2002 ; Sengupta 2004 ; Bowen, Davis, and Matsumoto 2005 ). We extend this literature by examining managers’ use of language in narrative disclosures across two disclosure outlets — earnings press releases and Management’s Discussion and Analysis (MD&A) included with firms’ SEC 10‐Q or 10‐K filings. Quarterly earnings announcement press releases and MD&A are both outlets by which managers communicate firm performance in narrative form. Earnings press releases are generally released prior http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Contemporary Accounting Research Wiley

Managers’ Use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus MD&A *

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References (60)

Publisher
Wiley
Copyright
© 2012 The Canadian Academic Accounting Association
ISSN
0823-9150
eISSN
1911-3846
DOI
10.1111/j.1911-3846.2011.01125.x
Publisher site
See Article on Publisher Site

Abstract

1. Introduction Corporate financial disclosure consists of an integrated series of communications that can reduce information asymmetry and agency conflicts between a firm’s managers and its external stakeholders. Financial disclosures come in numerical and narrative forms and include both mandated reports and voluntary disclosures. Managers distribute disclosures via various communication outlets including press releases, conference calls, and Securities and Exchange Commission (SEC) filings. In developing an overall disclosure strategy, it is likely that managers consider the timing, form, and visibility of alternative disclosure outlets. Prior research provides evidence consistent with this claim and demonstrates that market participants respond not only to the content, but also to the timing and form of financial disclosures (e.g., Begley and Fischer 1998 ; Bagnoli, Kross, and Watts 2002 ; Sedor 2002 ; Sengupta 2004 ; Bowen, Davis, and Matsumoto 2005 ). We extend this literature by examining managers’ use of language in narrative disclosures across two disclosure outlets — earnings press releases and Management’s Discussion and Analysis (MD&A) included with firms’ SEC 10‐Q or 10‐K filings. Quarterly earnings announcement press releases and MD&A are both outlets by which managers communicate firm performance in narrative form. Earnings press releases are generally released prior

Journal

Contemporary Accounting Research – Wiley

Published: Sep 1, 2012

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