Do Numbers Speak Louder Than Words?
37 Pages Posted: 13 Jan 2017 Last revised: 8 Feb 2018
Date Written: February 7, 2018
I investigate the information in the ratio of numeric and textual content in corporate disclosures. I hypothesize that this ratio contains value-relevant information, since executives are likely to obscure poor performances using textual disclosures. Consistent with this hypothesis, I find that a low proportion of numeric information is associated with poor returns surrounding the earnings conference call. Additionally, a low percentage of numeric information predicts a negative drift in stock returns after the conference call date and a negative earnings surprise next quarter. Finally, this ratio is negatively related to investors' uncertainty and disagreement measured by absolute forecast error, forecast dispersion, and trading volume.
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