Market Reaction to the Positiveness of Annual Report Narratives

42 Pages Posted: 2 Jan 2015 Last revised: 15 Nov 2015

See all articles by Liafisu Yekini

Liafisu Yekini

Coventry University

Tomasz Piotr Wisniewski

Open University, UK

Yuval Millo

London School of Economics & Political Science (LSE) - Accounting Department

Date Written: December 31, 2014

Abstract

This paper focuses on narratives published by UK companies, defined here as the content of annual reports excluding financial statements and notes to accounts. We endeavour to gauge the tone of these narratives by recording the frequency of positive words appearing in the text. We show that the extent of positiveness is related to market reaction around the disclosure date. This conclusion is maintained even after controlling for the financial figures that are reported simultaneously and company-specific characteristics. Consequently, narratives should not be perceived as mere impression management tools, but also as conduits for disseminating price-sensitive information.

Keywords: Annual report narrative, content analysis, stock market reaction

JEL Classification: M41, G12, G14

Suggested Citation

Yekini, Liafisu and Wisniewski, Tomasz Piotr and Millo, Yuval, Market Reaction to the Positiveness of Annual Report Narratives (December 31, 2014). Available at SSRN: https://ssrn.com/abstract=2544266 or http://dx.doi.org/10.2139/ssrn.2544266

Liafisu Yekini

Coventry University ( email )

William Morris building
Coventry Business School, Gosford Street
Coventry, CV1 5DL
United Kingdom

Tomasz Piotr Wisniewski (Contact Author)

Open University, UK ( email )

Walton Hall
Milton Keynes, Buckinghamshire MK7 6AA
United Kingdom

Yuval Millo

London School of Economics & Political Science (LSE) - Accounting Department ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/collections/accounting/facultyAndStaff/profiles/Millo.htm

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