Corporate Disclosure: Facts or Opinions?

50 Pages Posted: 14 Nov 2021 Last revised: 29 Nov 2021

See all articles by Shimon Kogan

Shimon Kogan

Reichman University - Arison School of Business; University of Pennsylvania - The Wharton School

Vitaly Meursault

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

Date Written: November 14, 2021

Abstract

A large body of literature documents the link between textual communication (e.g., news articles, earnings calls) and firm fundamentals, either through pre-defined “sentiment” dictionaries or through machine learning approaches. Surprisingly, little is known about why textual communication matters. In this paper, we take a step in that direction by developing a new methodology to automatically classify statements into objective (“facts”) and subjective (“opinions”) and apply it to transcripts of earnings calls. The large scale estimation suggests several novel results: (1) Facts and opinions are both prominent parts of corporate disclosure, taking up roughly equal parts, (2) higher prevalence of opinions is associated with investor disagreement, (3) anomaly returns are realized around the disclosure of opinions rather than facts, and (4) facts have a much stronger correlation with contemporaneous financial performance but facts and opinions have an equally strong association with financial results for the next quarter.

Keywords: Subjectivity, Machine Learning, NLP, Text Analysis

JEL Classification: G14, G12, C00

Suggested Citation

Kogan, Shimon and Meursault, Vitaly, Corporate Disclosure: Facts or Opinions? (November 14, 2021). Available at SSRN: https://ssrn.com/abstract=3963260 or http://dx.doi.org/10.2139/ssrn.3963260

Shimon Kogan

Reichman University - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Vitaly Meursault (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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