How to Talk When a Machine is Listening: Corporate Disclosure in the Age of AI

Review of Financial Studies, Forthcoming

84 Pages Posted: 14 Sep 2020 Last revised: 22 Mar 2023

See all articles by Sean Cao

Sean Cao

University of Maryland - Robert H. Smith School of Business

Wei Jiang

Emory University Goizueta Business School; ECGI; NBER

Baozhong Yang

Georgia State University - Robinson College of Business

Alan L. Zhang

Florida International University (FIU)

Multiple version iconThere are 2 versions of this paper

Date Written: January 12, 2023

Abstract

Growing AI readership (proxied for by machine downloads and ownership by AI-equipped investors) motivates firms to prepare filings friendlier to machine processing and to mitigate linguistic tones that are unfavorably perceived by algorithms. Loughran and McDonald (2011) and BERT available since 2018 serve as event studies supporting attribution of the decrease in the measured negative sentiment to increased machine readership. This relationship is stronger among firms with higher benefits to (e.g., external financing needs) or lower cost (e.g., litigation risk) of sentiment management. This is the first study exploring the feedback effect on corporate disclosure in response to technology.

Keywords: Machine Learning, AI, Corporate Disclosure, Textual Analysis, Speech Analysis, Feedback Effect

JEL Classification: D83, G14, G30

Suggested Citation

Cao, Sean S. and Jiang, Wei and Yang, Baozhong and Zhang, Alan L., How to Talk When a Machine is Listening: Corporate Disclosure in the Age of AI (January 12, 2023). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3683802 or http://dx.doi.org/10.2139/ssrn.3683802

Sean S. Cao

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Wei Jiang

Emory University Goizueta Business School ( email )

1300 Clifton Rd
Atlanta, GA 30322
United States

ECGI ( email )

c/o the Royal Academies of Belgium
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Belgium

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Baozhong Yang (Contact Author)

Georgia State University - Robinson College of Business ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States
404-413-7350 (Phone)
404-413-7312 (Fax)

HOME PAGE: http://sites.google.com/view/baozhongyang/

Alan L. Zhang

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://www.alanlzhang.com

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