Number of Numbers: Does Quantitative Textual Disclosure Reduce Information Risk?

51 Pages Posted: 2 Feb 2021 Last revised: 19 Aug 2021

See all articles by John L. Campbell

John L. Campbell

University of Georgia - J.M. Tull School of Accounting

Xin Zheng

University of British Columbia

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: August 19, 2021

Abstract

Theoretical research argues that numbers convey more precise information than words. Based on this work, we hypothesize that when managers provide disclosure with a greater proportion of quantitative information, information risk will decrease and firm value will increase. We offer three main findings. First, after controlling for the cash flow news in earnings conference calls, we find a positive association between the extent of hard information (i.e., numerical disclosure) and short-window stock returns around the call. This result suggests that information risk decreases when managers provide greater numerical disclosure. Second, we find that this positive association is larger when firms’ information environment is otherwise poor. Finally, we find that this positive association is larger when uncertainty about firm performance is higher (i.e., when the firm issues a negative earnings surprise). Overall, our results suggest that investors react to the extent of hard information (i.e., numerical disclosure) in earnings conference calls.

Keywords: Quantitative Disclosure, Numerical Information, Earnings Conference Calls, Voluntary Disclosure, Textual Analysis

JEL Classification: G14, G12, M41, G10

Suggested Citation

Campbell, John L. and Zheng, Xin and Zhou, Dexin, Number of Numbers: Does Quantitative Textual Disclosure Reduce Information Risk? (August 19, 2021). Available at SSRN: https://ssrn.com/abstract=3775905 or http://dx.doi.org/10.2139/ssrn.3775905

John L. Campbell

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706.542.3595 (Phone)
706.542.3630 (Fax)

Xin Zheng (Contact Author)

University of British Columbia ( email )

2053 Main Mall
Vancouver, B.C. V6T 1Z2
Canada

Dexin Zhou

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Avenue
New York, NY 10010
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
380
Abstract Views
1,395
rank
108,566
PlumX Metrics