Language and Management Forecasts around the World

Posted: 19 Jul 2021

See all articles by Yuyan Guan

Yuyan Guan

Nanyang Business School, Nanyang Technological University

Zheng Wang

City University of Hong Kong

M.H. Franco Wong

University of Toronto - Rotman School of Management

Xiangang Xin

City University of Hong Kong

Date Written: July 12, 2021

Abstract

Speakers of weak future-time reference (FTR) languages perceive the future as closer and more imminent. In this study, we examine the important question of whether the FTR properties of languages spoken by investors affect their demand for forward-looking information, thereby influencing corporate management forecast practices in different countries. We predict that investors who speak weak-FTR languages are more concerned about the future prospects of their investments and the ability of company management to respond to future changes, leading to a greater demand for management forecasts from these companies. We find that firms in weak-FTR language countries exhibit a greater propensity for and frequency of issuing management forecasts and that they also issue more long-horizon forecasts, compared to those in strong-FTR language countries. Our results hold after controlling for other country-level cultural factors. Within the same countries, firms with more foreign institutional ownership from weak-FTR countries issue more (long-horizon) management forecasts than their counterparts. Finally, firms from strong-FTR countries significantly increase their issuance of (long-horizon) management forecasts, after cross-listing their stocks in Germany, a weak-FTR country. This is the first study to examine language FTR as an antecedent to voluntary disclosures. We document a linguistic trait as a novel investor environment factor that shapes corporate voluntary disclosures and explains the cross-country variations in management forecast practices.

Keywords: Language, linguistic relativity principle, future time reference, management earnings forecasts, foreign institutional ownership, cross-listing

JEL Classification: D83, G15, M41, Z13

Suggested Citation

Guan, Yuyan and Wang, Zheng and Wong, M.H. Franco and Xin, Xiangang, Language and Management Forecasts around the World (July 12, 2021). Contemporary Accounting Research, Forthcoming, Rotman School of Management Working Paper No. 3886553, Available at SSRN: https://ssrn.com/abstract=3886553

Yuyan Guan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

Zheng Wang

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

M.H. Franco Wong

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-0729 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Wong.aspx

Xiangang Xin

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
Hong Kong

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