Are Investors Influenced by the Order of Information in Earnings Press Releases?

Research has begun to analyze the tone and narrative structure of earnings announcements after decades of focusing on market reactions to the earnings news itself. One conclusion from this literature is that language matters – the tone (i.e., the excess of optimistic over pessimistic language) and opacity of the earnings announcement text is associated with future firm performance and with the market reaction to the earnings press release.  In other words, managers’ language choices convey information beyond that captured by earnings, and investors respond accordingly.

In a recent paper, we study another aspect of managers’ disclosure choice: the decision to … Read more