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Is company textual innovation disclosure effective? Evidence from China

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Listed:
  • Sun, Yucheng
  • Lu, Huizhong
  • Hu, Yan
  • Luo, Meizhen

Abstract

Effective information disclosure about innovation can eliminate the degree of information asymmetry between the companies and outside investors. Using data from Chinese A-share listed companies from 2009 to 2019, this study focuses on the effectiveness of textual disclosure on innovation activities. Our findings indicate that, in general, textual innovation disclosures are effective in China. The positivity of the tone in these disclosures is closely linked to R&D investment and patent output, sending a consistent signal to the market. However, this positive relationship holds only when both R&D expenditure and patent output are maintained at high levels. Further analysis reveals that management characteristics, such as overconfidence, can cause the innovation information disclosed in texts to diverge from actual innovation activities, reducing the effectiveness of textual disclosures. Our results remain robust when using alternative variables, samples, or controlling for endogeneity. This study provides recommendations for developing countries to enhance the quality of innovation information disclosure, supporting the healthy development of the capital market.

Suggested Citation

  • Sun, Yucheng & Lu, Huizhong & Hu, Yan & Luo, Meizhen, 2025. "Is company textual innovation disclosure effective? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:pacfin:v:94:y:2025:i:c:s0927538x25002847
    DOI: 10.1016/j.pacfin.2025.102947
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