Research On The Influence Of Annual Report Tone On Capital Market Pricing Efficiency

The basic function of capital market is to realize the optimal allocation of resources by using the signal mechanism of stock price.In an effective stock market,stock price can guide the effective allocation of resources.The function of stock price depends on whether it can fully reflect the internal value of enterprises.This ability of stock price to reflect information is also a symbol to measure the operation efficiency of a national securities market.Compared with the mature capital market,the majority of retail investors in China’s A-share market,and the legal system is not perfect.The stock price often contains a lot of "noise",which can not truly reflect the real situation of the company,and it is difficult to effectively play the guiding role of resource allocation.Moreover,in the report of the 19th CPC National Congress,it was clearly proposed to "deepen the reform of the financial system and enhance the ability of financial services to the real economy".Obviously,only when the stock price fully reflects the company’s characteristic information,the financial market can reasonably allocate resources and safeguard the interests of investors.In the 14th five year plan,it is pointed out that "improve the basic system of capital market and improve the multi-level capital market system".Moreover,it is proposed to "fully implement the stock issuance registration system and establish a normalized delisting mechanism".While relaxing the conditions for public offering,the capital market has further strengthened the requirements for information disclosure.Therefore,in this context,it is of great theoretical and practical significance to study the influencing factors of capital market pricing efficiency and give full play to the decisive role of the market in resource allocation.Information transmission is the core of maintaining the smooth operation of the capital market.Sufficient information disclosure can effectively alleviate the information asymmetry between investors and companies,promote the effective allocation of resources and ensure the healthy and sustainable development of the capital market.As an important source of information in the capital market,accounting information can provide investors with useful information for decision-making.Previous studies show that investors mostly focus on digital financial information,while text information is less concerned by investors.However,with the frequent occurrence of financial fraud and the increasing demand of investors for information,financial information can not meet the decision-making needs of investors,and text information began to attract people’s attention.As the main body of accounting information,the company’s annual report accounts for a large proportion,has rich expression methods,more diverse transmission channels,and has rich connotation.In the environment of high context communication in China,text information is becoming more and more important.With the continuous improvement of computer data processing ability,text analysis has become the focus of current accounting research,including the intonation research measured by positive and negative emotional expression,which has developed rapidly.The management will reflect their emotional attitude towards the future development of the company in the text information.When investors interpret the text information of the annual report,will the emotional tone expressed by the management affect investors’decision-making and then the pricing efficiency of the capital market?Based on this,this paper selects A-share non-financial listed companies from 2012 to 2019.Based on principal-agent theory,information asymmetry theory,efficient market theory,signal transmission theory and impression management theory,this paper analyzes the pricing efficiency of capital market from three aspects:stock price synchronization,stock liquidity and stock price collapse risk This paper systematically studies the influence of annual report intonation on capital market pricing efficiency,and reveals its influence mechanism.The main research conclusions are reflected in the following four aspects:(1)The net positive tone of the annual report significantly improves the synchronization of stock prices,reduces stock liquidity,intensifies the risk of stock price collapse,and reduces the pricing efficiency of the capital market to a certain extent,indicating that the net positive tone of the annual report does not represent good business conditions,but the result of strategic disclosure by the management.(2)This paper finds that the tone of annual report affects the pricing efficiency of capital market by affecting the information transparency of listed companies and investor sentiment.Specifically,the net positive tone of the annual report is the manipulation of the tone of the annual report text by the management,which reduces the information transparency of the company,thus reducing the pricing efficiency of the capital market(improving the synchronization of stock prices and reducing stock liquidity);Moreover,the management’s usual means of manipulating the tone of the annual report is to express the same content in different ways,which will affect the investor’s mood and affect the investor’s judgment on the company’s value,thus damaging the pricing efficiency of the capital market(improving the synchronization of stock prices and reducing the liquidity of shares).(3)This paper further discusses the impact of annual report reliability on annual report intonation and capital market pricing efficiency.It is found that when the readability of the annual report is poor,the net positive tone of the annual report significantly reduces the pricing efficiency of the capital market(improving the synchronization of stock prices,reducing stock liquidity and reducing the risk of stock price collapse);When the performance is inconsistent,the net positive tone of the annual report significantly reduces the pricing efficiency of the capital market;When listed companies have management motivation,the net positive tone of the annual report significantly reduces the pricing efficiency of the capital market.(4)The negative tone of the annual report significantly reduces the synchronization of the stock price,improves the stock liquidity and reduces the risk of stock price collapse,ensures the information content and stability of the annual report text information disclosure,and shows that the negative tone of the annual report provides investors with characteristic information.Even if the management will vaguely disclose and hide the company’s negative news,when it is disclosed in the annual report text information,It shows that the enterprise does have risks and plays a role of "preventive injection" for investors.The main innovations of this paper are as follows:first,this paper systematically and comprehensively investigates the text information from the multi-dimensional perspective of annual report language harmony and reliability,and expands the research extension of annual report text information disclosure of listed companies.This paper combines language harmony and readability to explore whether the impact of annual report intonation is consistent under different annual report readability.In addition,it also discusses the reliability of annual report intonation information from the perspective of whether intonation is consistent with performance and whether there is management motivation,and makes a comprehensive and systematic discussion from the perspective of the authenticity of information disclosure,which opens up a new research perspective for the follow-up study of annual report intonation.Second,most of the existing literatures explore the influencing factors of capital market pricing efficiency from a single aspect(stock price synchronization.stock liquidity and stock price collapse risk).This paper mainly studies the capital market pricing efficiency comprehensively and systematically from three aspects:stock price synchronization,stock liquidity and stock price collapse risk,It expands the research boundary of capital market pricing efficiency and deepens the understanding of capital market pricing efficiency.Thirdly,it constructs the general theoretical analysis and empirical research framework of "annual report intonationInformation Transparency-capital market pricing efficiency" and "annual report intonation-investor sentiment-capital market pricing efficiency",and further clarifies the causal relationship between annual report intonation and capital market pricing efficiency(stock price synchronization,stock liquidity and stock price collapse risk),This paper contributes to a deeper understanding of the transmission mechanism of annual report intonation affecting capital market pricing efficiency,and provides a new idea for similar research.Fourth,this paper further studies the impact of the negative tone of the annual report on the pricing efficiency of the capital market,and finds that the negative tone of the annual report can improve the pricing efficiency of the capital market.Based on the basic principles of information disclosure,this paper explores the impact on the pricing efficiency of the capital market from the perspective of the negative tone of the annual report,which is more comprehensive and systematic than previous studies.