Writing Styles Social Conformity, Firm Performance, and Earnings Persistence – A Deep Learning Approach
Posted: 12 Sep 2018 Last revised: 21 Nov 2018
Date Written: August 29, 2018
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
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