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The Real Effects of Disclosure Tone: Evidence from Restatements

55 Pages Posted: 31 Jul 2010 Last revised: 9 Mar 2012

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Claudine Mangen

Concordia University, Montreal - John Molson School of Business

Date Written: September 12, 2011

Abstract

This study analyzes whether the tone of financial disclosures affects corporate investments, using texts released by firms that publicly announce restatements of their financial reports. We argue that the tone of restatement texts provides news about restating firms' private information regarding unknown future investment payoffs. We find that restatement tone carries news, because it affects restating firms' and their competitors' abnormal returns at restatement announcements, and changes their information asymmetry. Moreover, we document that news in the restatement tone matters for corporate investments, since it is related to subsequent changes in restating firms' and their competitors' investments.

Keywords: language tone, restatements, investment

JEL Classification: M43, M41, M45

Suggested Citation

Durnev, Art and Mangen, Claudine, The Real Effects of Disclosure Tone: Evidence from Restatements (September 12, 2011). Available at SSRN: https://ssrn.com/abstract=1650003 or http://dx.doi.org/10.2139/ssrn.1650003

Artyom Durnev (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

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Iowa City, IA 52242-1000
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HOME PAGE: http://www.artdurnev.com

Claudine Mangen

Concordia University, Montreal - John Molson School of Business ( email )

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Montreal, Quebec H3H 0A1
Canada
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+1 (514) 848 45 18 (Fax)

HOME PAGE: http://claudinemangen.com/

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