International Earnings Announcements: Tone, Forward-looking Statements, and Informativeness

The European Accounting Review, Forthcoming

53 Pages Posted: 26 Aug 2021

See all articles by Elaine Henry

Elaine Henry

Stevens Institute of Technology - School of Business

James Thewissen

Catholic University of Louvain (UCL) - Louvain Finance (LFIN); KU Leuven - Faculty of Business and Economics (FEB)

Wouter Torsin

HEC Liège, Management School of the University of Liège

Date Written: July 17, 2021

Abstract

This paper examines two attributes of earnings press releases issued by firms cross-listed on U.S. stock exchanges: the tone and frequency of forward-looking statements. A more conservative tone and a greater proportion of forward-looking statements are often viewed as contributing to more credible disclosures. Our analysis indicates that culturally and institutionally more distant firms are generally less positive in their disclosures and include more forward-looking statements than U.S. firms. Further, we find that the tone and frequency of forward-looking statements of cross-listed firms’ earnings announcements are more informative than those of U.S. firms in predicting future firm performance, and this informativeness generally increases with the cultural and institutional distance of the home country from the U.S. In explaining market reaction to earnings announcements, tone informativeness in particular increases with the cultural distance of the home country from the U.S. Overall, in the context of home bias theory, we interpret our findings as suggesting that a cautious disclosure tone and more forward-looking information serve to mitigate potential home bias-related credibility and asymmetric information concerns arising from cultural and institutional distance.

Keywords: disclosure; tone; forward-looking; credibility; home bias; cross-listed firms

Suggested Citation

Henry, Elaine and Thewissen, James and Torsin, Wouter, International Earnings Announcements: Tone, Forward-looking Statements, and Informativeness (July 17, 2021). The European Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3889026 or http://dx.doi.org/10.2139/ssrn.3889026

Elaine Henry

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

James Thewissen

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Wouter Torsin (Contact Author)

HEC Liège, Management School of the University of Liège ( email )

Rue Louvrex 14
Liège, 4000
Belgium

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