Does Political Uncertainty Obfuscate Narrative Disclosure?

• 成果类型: Article
• 署名作者: Mekhaimer, Mohamed; Soliman, Marwa; Zhang, Weining
• 署名单位: Saint John Fisher University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0884
• 发表日期: 2024
• 页码: 367-394
• 关键词: financial statement complexity; external corporate governance; annual-report readability; Policy Uncertainty; CONFERENCE CALLS; INTERNAL CONTROL; stock returns; earnings; RISK; cost

摘要

We examine the relation between political uncertainty and narrative disclosure complexity in conference calls. Using firm -level political uncertainty, we find that political uncertainty is positively associated with firms' disclosures complexity as measured by the Fog index. Decomposing complexity into two latent components- information and obfuscation-we show that political uncertainty significantly increases the obfuscation but has no impact on the information. Further analysis reveals that complex disclosure is motivated by expected poor future performance amid political uncertainty. We also show that, during periods of heightened political uncertainty, obfuscated disclosure is associated with reduced earnings informativeness, increased dispersion in analyst forecasts, and higher volatility in forecast revisions. These findings are robust to including and excluding sentences containing complex political bigrams when calculating Fog. Further evidence shows that, during periods of political uncertainty, managers tend to use a more ambiguous tone and provide scripted and shorter (longer) responses to analysts' questions (presentations).