An Investigation into Managers' Language Use in Earnings Press Releases

For years, researchers have examined financial data in corporate earnings announcements and their influence on market participants. More recently, a body of research has been developing recognizing the impact of narrative disclosures and managers' deliberate language choices. However, no prior...

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Main Author: Riley, Tracey Jean
Format: Others
Published: ScholarWorks@UMass Amherst 2011
Subjects:
Online Access:https://scholarworks.umass.edu/open_access_dissertations/344
https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1345&context=open_access_dissertations
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spelling ndltd-UMASS-oai-scholarworks.umass.edu-open_access_dissertations-13452020-12-02T14:38:33Z An Investigation into Managers' Language Use in Earnings Press Releases Riley, Tracey Jean For years, researchers have examined financial data in corporate earnings announcements and their influence on market participants. More recently, a body of research has been developing recognizing the impact of narrative disclosures and managers' deliberate language choices. However, no prior studies have investigated those language choices of managers which are likely unintentional in composing such narratives; language choices which, as previous research has revealed, escape conscious access. Using an empirically-grounded model which systematically classifies different predicates, I examined whether managers use systematic patterns of language when construing the earnings press release in a likely unintentional effort to channel or direct readers' attention. I found that managers write positive information using a more concrete construal than negative information. Additionally, I used experimental data to examine whether these systematic differences lead to different perceptions of the company and its value as an investment alternative. Nonprofessional investors performed an analysis of an earnings press release where I manipulated the valence of the narrative as positive or negative and the construal of the narrative as abstract or concrete. I found that these manipulations had an interactive influence on investment decisions. Specifically, investors were least likely to invest when a negatively valenced narrative was written concretely. I also found that the influence of the narrative on the investment decision was direct and not the result of the narrative influencing the investors' focus of attention on the accompanying financial statements. Additionally, I tested whether the investor judgments were due to intentional cognitive effects and found that the influence of the narrative on the investment decision was not conscious on the part of the investor. Lastly, I conducted an analysis of archival data to examine the relationship between managers' language use in forward-looking statements of the earnings press release and future firm performance and the extent to which the market responds to these linguistic clues. Results from the analysis suggest that construal is predictive of future firm performance and the market is incorporating this into pricing for firms that meet or beat earnings expectations. 2011-02-01T08:00:00Z text application/pdf https://scholarworks.umass.edu/open_access_dissertations/344 https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1345&context=open_access_dissertations Open Access Dissertations ScholarWorks@UMass Amherst accounting narrative disclosures earnings press release Linguistic Category Model (LCM) linguistics strategic language use Business
collection NDLTD
format Others
sources NDLTD
topic accounting narrative disclosures
earnings press release
Linguistic Category Model (LCM)
linguistics
strategic language use
Business
spellingShingle accounting narrative disclosures
earnings press release
Linguistic Category Model (LCM)
linguistics
strategic language use
Business
Riley, Tracey Jean
An Investigation into Managers' Language Use in Earnings Press Releases
description For years, researchers have examined financial data in corporate earnings announcements and their influence on market participants. More recently, a body of research has been developing recognizing the impact of narrative disclosures and managers' deliberate language choices. However, no prior studies have investigated those language choices of managers which are likely unintentional in composing such narratives; language choices which, as previous research has revealed, escape conscious access. Using an empirically-grounded model which systematically classifies different predicates, I examined whether managers use systematic patterns of language when construing the earnings press release in a likely unintentional effort to channel or direct readers' attention. I found that managers write positive information using a more concrete construal than negative information. Additionally, I used experimental data to examine whether these systematic differences lead to different perceptions of the company and its value as an investment alternative. Nonprofessional investors performed an analysis of an earnings press release where I manipulated the valence of the narrative as positive or negative and the construal of the narrative as abstract or concrete. I found that these manipulations had an interactive influence on investment decisions. Specifically, investors were least likely to invest when a negatively valenced narrative was written concretely. I also found that the influence of the narrative on the investment decision was direct and not the result of the narrative influencing the investors' focus of attention on the accompanying financial statements. Additionally, I tested whether the investor judgments were due to intentional cognitive effects and found that the influence of the narrative on the investment decision was not conscious on the part of the investor. Lastly, I conducted an analysis of archival data to examine the relationship between managers' language use in forward-looking statements of the earnings press release and future firm performance and the extent to which the market responds to these linguistic clues. Results from the analysis suggest that construal is predictive of future firm performance and the market is incorporating this into pricing for firms that meet or beat earnings expectations.
author Riley, Tracey Jean
author_facet Riley, Tracey Jean
author_sort Riley, Tracey Jean
title An Investigation into Managers' Language Use in Earnings Press Releases
title_short An Investigation into Managers' Language Use in Earnings Press Releases
title_full An Investigation into Managers' Language Use in Earnings Press Releases
title_fullStr An Investigation into Managers' Language Use in Earnings Press Releases
title_full_unstemmed An Investigation into Managers' Language Use in Earnings Press Releases
title_sort investigation into managers' language use in earnings press releases
publisher ScholarWorks@UMass Amherst
publishDate 2011
url https://scholarworks.umass.edu/open_access_dissertations/344
https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1345&context=open_access_dissertations
work_keys_str_mv AT rileytraceyjean aninvestigationintomanagerslanguageuseinearningspressreleases
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