Research On The Relationship Between Management Discussion & Analysis’tone And Firms’ Performance

With the advent of the Big Data era,tremendous amount of information has become a treasure.Due to the development of computer text mining technology,a large number of accounting texts,information and public disclosure generate high research value,which marks an information explosion era in the field of accounting.Since management Discussion&Analysis(MD&A)system was introduced in China in 2002,it has formed an crucial non-financial information text,and has made vital supplements to financial data of enterprises.It has also been fruitfully applied in many fields,such as improving information asymmetry,forecasting and identifying frauds.In this paper,’tone’,the important characteristic in linguistics is introduced into MD&A research on the annual report management texts.Using term-based matching technique,one of the major computer text mining technologies,the dissertation quantifies the tones of MD&A of more than 4000 listed companies’ annual reports in China from 2015 to 2016.By establishing the regression model,the dissertation empirically studies the relationship between tone of MD&A and corporate performance in four aspects-the Shanghai Stock Exchange,the Shenzhen Stock Exchange,the small board and the GEM.It reveals that,there is a significant negative correlation between negative tone of MD&A text and corporate performance.Negative tone can not only effectively reflect the performance of enterprises,but also forecast business performance for the next year.However,positive tone is not significantly correlated with corporate performance in the Shenzhen Stock Exchange,in the small board or in the GEM.It is only in the regression model of Shanghai Stock Exchange that positive tone is significantly related with corporate performance,though the effect is not so strong as negative tone.The empirical analysis implies that,although there is a certain degree of "neglecting their weaknesses"phenomenon,MD&A in China contains useful information increment.Specially,the negative tone conveyed by management deserves much attention.