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The signaling effect of tone: The influence of key audit matters’ tone on bank lending decisions

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  • Duan, Mingli

Abstract

I apply the BERT model to assess the tone of key audit matters (KAMs) disclosed by auditors of Chinese A-share companies from 2016 to 2022, and investigate the impact of tone on bank lending decisions. The findings indicate that a negative tone serves as a risk signal by helping reveal information risk and assess credit risk. Positive and negative tones exhibit asymmetric signaling effects, with expected tones exerting a stronger influence than unexpected tones. These results highlight that the audit report's tone is a more credible risk indicator than management's tone, thereby providing strong support for banks’ credit decision-making process.

Suggested Citation

  • Duan, Mingli, 2025. "The signaling effect of tone: The influence of key audit matters’ tone on bank lending decisions," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325001928
    DOI: 10.1016/j.frl.2025.106928
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