Empirical Survey On Annual Report Tone And Stock Crash Risk

Outside investors can obtain information equally through company financial reporting,which will be beneficial to the effective operation of the capital market and will facilitate the effective allocation of resources.However,China’s information disclosure system is still not perfect.There is no clear disclosure requirement for plain text information.Compared with financial data information,plain text information has poor objectivity,and it is difficult to quantify and measure its authenticity.Due to these characteristics,plain text information has large space for manipulation.In annual report,the section of management discussion and analysis is an important information source for investors to understand listed companies.In addition to financial information,it also contains a large amount of plain text information.The management may use the means of writing to achieve its own purpose,to control the tone,to cover up the real content,and then this kind of behavior will cause information asymmetry.What effect does this means of writing have on the stock crash risk?This is the problem to be studied in this article.The paper mainly study the relationship between positive tone,blind optimistic tone,negative tone,determined tone,ambiguous tone and the stock crash risk.The empirical results show that the positive tone has little effect on the stock crash risk.Blind optimistic tone,negative tone,and ambiguous tone will increase the stock crash risk,and determind tone will reduce stock crash risk.It shows that the management’s tone control will increase the degree of information asymmetry,which will actually increase the company’s potential risks and lead to stock price crash easily.The more clearly the management tone is,the lower company’s stock crash risk is.Finally,this paper verifies that analyst follow-up will reduce the information asymmetry between the company and the outside.High analyst follow-up will reduce the impact of text tone on the stock crash risk.In addition,the paper also uses the information disclosure quality report published by the Shenzhen Stock Exchange and the Shanghai Stock Exchange to study the relationship between the tone of different quality report and stock crash risk.