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Different time, different tone: Company life cycle

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  • Bakarich, Kathleen M.
  • Hossain, Mahmud
  • Hossain, Mahmud
  • Weintrop, Joseph

Abstract

This paper examines how the qualitative characteristics of annual reports vary across different phases of the corporate life cycle. We measure the complexity, tone, and sentiment of 10-Ks, and classify firms into their distinct life cycle phases. Considering a sample of 24,268 firm-year observations from 2000 to 2014, we find that each of the life cycle indicators is a determinant of different textual characteristics. The results show that firms’ 10-K disclosures become less complex, less ambiguous, and more optimistic as they progress from the introduction to the maturity stage. Clarity and readability peak at the maturity level, prior to firms entering the final decline stage, characterized by the most negative and ambiguous disclosures. This paper provides timely evidence to regulators and investors on the circumstances under which firms provide qualitatively different disclosures and shows that the textual characteristics of firm disclosure are not static over life cycle stages.

Suggested Citation

  • Bakarich, Kathleen M. & Hossain, Mahmud & Hossain, Mahmud & Weintrop, Joseph, 2019. "Different time, different tone: Company life cycle," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(1), pages 69-86.
    • Handle: RePEc:eee:jocaae:v:15:y:2019:i:1:p:69-86
    DOI: 10.1016/j.jcae.2018.12.002
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    Cited by:

    1. Ammar Hussain & Minhas Akbar & Muhammad Kaleem Khan & Ahsan Akbar & Mirela Panait & Marian Catalin Voica, 2020. "When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies," JRFM, MDPI, vol. 13(12), pages 1-19, December.
    2. Evelini Lauri Morri Garcia & Valter Afonso Vieira & Caroline Pereira Borges, 2022. "Marketing Investment Information: Differentiation Resource or Secret?," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(2), pages 200386-2003.
    3. Biswas, Pallab Kumar & Habib, Ahsan & Ranasinghe, Dinithi, 2022. "Firm life cycle and financial statement comparability," Advances in accounting, Elsevier, vol. 58(C).
    4. Kathleen Bakarich & Jiaxin Liu & Joseph Weintrop, 2021. "At what life-cycle stage does the auditors’ going concern report add value?," Review of Quantitative Finance and Accounting, Springer, vol. 56(3), pages 1129-1157, April.
    5. Bikki Jaggi & Alessandra Allini & Raffaela Casciello & Fiorenza Meucci, 2022. "Firm life cycle stages and earnings management," Review of Quantitative Finance and Accounting, Springer, vol. 59(3), pages 1019-1049, October.
    6. Muhammad Farhan Malik & Yuan George Shan & Jamie Yixing Tong, 2022. "Do auditors price litigious tone?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1715-1760, April.

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    More about this item

    Keywords

    Qualitative disclosure; Firm life cycle; 10-K; Textual characteristics;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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