Corporate Textual Disclosure and Economic Growth
48 Pages Posted: 1 Apr 2020
Date Written: March 6, 2020
Using proxies for the textual disclosure quality of Form 20-F filings by firms from 28 countries cross-listed in the U.S., we find that aggregate corporate textual disclosure quality predicts a country’s economic growth for up to two years, even after controlling for aggregate earnings growth and other macroeconomic indicators. The predictability of aggregate textual disclosure quality is more pronounced for home countries with weak institutions. Additional analyses suggest that textual disclosure quality enhances the informativeness of earnings and conveys information regarding operational activities, both of which help predict future economic growth. Our findings suggest that aggregate textual disclosure quality of firms from a given country serves as a leading indicator for economic growth in that country.
Keywords: Textual Disclosure Quality, Earnings Persistence, Operational Activities, Economic Growth, Institutions
JEL Classification: E00, E01, G18, M41
Suggested Citation: Suggested Citation