Writing Styles Social Conformity, Firm Performance, and Earnings Persistence – A Deep Learning Approach

Posted: 12 Sep 2018 Last revised: 21 Nov 2018

See all articles by Nan Hu

Nan Hu

Stevens Institute of Technology - School of Business

Peng Liang

Xi'an Jiaotong University (XJTU) - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 29, 2018

Abstract

This paper examines the relation between annual report boilerplate and firm performance and earnings persistence. Utilizing a neural network algorithm inspired by word2vec, we compute the annual report boilerplate, defined as the average probability of the occurring of each sentence in a given report based on the order of words. We find that: (1) the annual reports of firms with lower earnings are more standardized and their writing styles display stronger social conformity behavior (i.e., they have a higher level of boilerplate); and (2) firms with annual reports with less boilerplate have more persistent positive earnings.

Keywords: Writing styles; Annual report boilerplate; Word2vec; Earnings persistence

JEL Classification: D82; G18; M41; M45; G14

Suggested Citation

Hu, Nan and Liang, Peng, Writing Styles Social Conformity, Firm Performance, and Earnings Persistence – A Deep Learning Approach (August 29, 2018). Stevens Institute of Technology School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=3240333

Nan Hu (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Peng Liang

Xi'an Jiaotong University (XJTU) - School of Management ( email )

28,Xianning West Road
Xi'an, Shaanxi 710049
China

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