Research On The Relationship Between Management Tones And Firm’s Performance

With the rapid development of China’s capital market,investors’ attention to capital market information is no longer limited to traditional financial information,they pay more attention to non-financial information.Among them,the MD&A in the annual report of the listed company is an important non-financial information which including the review of the current business situation and the prospects for future development,naturally,it is widely concerned.The development of computer text mining technology makes it possible to conduct text analysis of management discussion and analysis texts under large samples.Foreign researchers have long used computer text mining technology to study the text information disclosed by listed companies.However,due to the particularity of Chinese,domestic research in this area is still relatively rare.In this paper,we introduce “tone” into the research of MD&A texts in the annual report of listed companies,using the current mainstream text analysis method "dictionary method" to study the relationship between the textual tone of MD&A and business performance in the annual report of listed companies in China.Exactly,through the process of annual report collection,text preprocessing,dictionary construction,word segmentation and word frequency statistics,this paper quantifies the tone of texts of more than 8,000 listed companies in 2015-2017.Divide MD&A text into review part and forward-looking part in text processing,then constract a regression model,separately study the management discussion and analysis,review the relationship between part of the text intonation and the company’s performance in the current year,and discuss and analyze the relationship between the textual tone of MD&A and the company’s next year’s performance.Our research find that in the review part the positive tone is significantly positively correlated with the company’s performance for the year,and the negative tone is significantly negatively correlated with the company’s performance for the year.Both positive and negative tones have incremental information about the condition of the company’s current business,and negative tones contain more informative content than positive tones.However,there is no significant correlation between the textual tone of the management discussion and analysis and the next year’s performance.The empirical results show that the textual tone of MD&A in the annual report of listed companies in China can partially reflect the business situation of the company in the current year,the content of the review part is rather objective,but the quality of the content of forward-looking part needs to be improved.Finally,we point out some problems existing in the MD&A information disclosure in the annual reports of Listed Companies in China and give some pertinent suggestions.