Textual Analysis and International Financial Reporting: Large Sample Evidence
63 Pages Posted: 13 Mar 2014 Last revised: 23 Oct 2015
Date Written: February 14, 2015
We examine annual report text for over 15,000 non-US companies from 42 countries over the period 1998-2011, focusing on the length of disclosure, presence of boilerplate, comparability with US and non-US firms and complexity. We find that textual attributes are predictably associated with regulation and incentives for more transparent disclosure, and are correlated with economic outcomes such as liquidity, institutional ownership and analyst following. Using mandatory IFRS adoption as an exogenous shock, annual report disclosure improved in the sense that quantity of disclosure increased, boilerplate was reduced and comparability increased relative to both US and non-US firms. Firms with the greatest improvements in financial reporting experienced the greatest improvements in economic outcomes around IFRS adoption.
Keywords: Textual Analysis, International Financial Reporting, IFRS, Disclosure, Comparability
JEL Classification: F30, G15, K20, M41, N20
Suggested Citation: Suggested Citation