Abstract

http://ssrn.com/abstract=2260371
 
 

References (56)



 


 



Disclosure Informativeness and the Tradeoff Hypothesis: A Text-Based Analysis


Christopher Ball


Meta Heuristica, LLC

Gerard Hoberg


University of Maryland - Department of Finance

Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

July 24, 2013


Abstract:     
Using highly granular computational linguistics tools, we find that disclosure in the Management's Discussion and Analysis section of the 10-K is highly informative regarding valuation, and its informativeness is likely influenced by trade offs. This disclosure is most informative regarding future cash flows, and can only be partially assessed using sentiment analysis or methods with low levels of granularity. Content analysis reveals that the following entrepreneurial discussions are most relevant: investment projects, revenue generation, marketing, growth strategies, and financial market liquidity. Analysis in time series reveals that firms likely manage informativeness following basic trade offs, as informativeness increases when firms issue equity, and following the 2003 SEC guidance release.

Number of Pages in PDF File: 56

Keywords: Valuation, 10-K, MD&A, Disclosure, Informativenesss, Text Analytics, Latent Dirichlet Allocation, Signaling

JEL Classification: G31, G38, G39, M40, M41

working papers series


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Date posted: May 4, 2013 ; Last revised: July 25, 2013

Suggested Citation

Ball, Christopher and Hoberg, Gerard and Maksimovic, Vojislav, Disclosure Informativeness and the Tradeoff Hypothesis: A Text-Based Analysis (July 24, 2013). Available at SSRN: http://ssrn.com/abstract=2260371 or http://dx.doi.org/10.2139/ssrn.2260371

Contact Information

Christopher Ball
Meta Heuristica, LLC ( email )
Fairfax, VA
United States
HOME PAGE: http://www.metaheuristica.com
Gerard Hoberg (Contact Author)
University of Maryland - Department of Finance ( email )
Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States
HOME PAGE: http://www.rhsmith.umd.edu/finance/faculty/hoberg.aspx
Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
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