Tone of Textual Information in Annual Reports and Regulatory Inquiry Letters: Data from China. Issue 2 (26th January 2022)

• Record Type: Journal Article
• Authors: Yang, Fan; Huang, Jiayu; Cai, Yongbin
• Is Part Of: Emerging markets finance & trade. Volume 58:Issue 2(2022)
• Page Start: 417
• Page End: 427
• Publication Date: 2022-01-26
• Subjects: Tone of annual report -- textual information -- regulatory inquiry -- violation -- audit opinion; M12 -- M41 -- M42; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2021.1903870
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: This paper examines the impact of the tone used in the annual reports of listed companies on the probability of regulatory inquiries from 2014 to 2019. The empirical results verify that the more positive tone of the annual report, the more it can exert a psychological framing effect, which makes the regulator less likely to issue an annual report inquiry letter. Further analysis shows that this impact that the tone of annual reports has on the probability of a regulatory inquiry is significantly weakened when the company has irregularities or has been issued a modified audit opinion by the auditor. Overall, the results provide the basis for the government to regulate the information disclosure of the annual reports.