Tone Concavity around Expected Earnings

• 成果类型: Article
• 署名作者: D'Augusta, Carlo; DeAngelis, Matthew D.
• 署名单位: Middle Tennessee State University; University System of Georgia; Georgia State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52448
• 发表日期: 2020
• 页码: 133-164
• 关键词: ANNUAL-REPORT READABILITY; voluntary disclosure; bad-news; SHAREHOLDER LITIGATION; asymmetric timeliness; MANAGERIAL OWNERSHIP; Textual analysis; management; incentives; conservatism

摘要

We examine whether the relationship between managerial tone and earnings performance depends on the performance of the firm relative to earnings expectations. Using both annual changes in earnings and the difference between realized earnings and analyst consensus forecasts, we find evidence of tone concavity'' around earnings expectations. Specifically, the covariance between managerial tone and earnings performance is positive when earnings are below expectations, but negative when earnings meet or exceed expectations. We interpret our results to suggest that managers downplay positive changes in earnings to attenuate future growth expectations. We also find that tone concavity is significantly attenuated by managers' career concerns and accounting conservatism, but unrelated to litigation risk. Our results indicate that the effect of earnings performance on disclosure tone is complex and reflects managers' incentives to manage expectations.