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Uncertainty words and corporate information environment

Author

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  • Yao, Kai
  • Chevapatrakul, Thanaset
  • Nguyen, Thach Vu Hong
  • Yin, Shiyan

Abstract

This paper investigates the impact of the uncertainty tone in a firm’s annual report on stock price informativeness. We show that firms with a higher proportion of uncertainty words in 10-Ks have lower stock idiosyncratic risk. Our results suggest that the uncertainty tone of a firm’s financial disclosures results in information uncertainty that deteriorates its stock price informativeness. While the tone dispersion amplifies the relation between uncertainty tone and firm-specific risk, the use of causation and discrepancy words attenuates this effect. Furthermore, external oversight mechanisms including analysts following, institutional holdings, audit quality and more frequent access to 10-Ks undermine the impact of uncertainty tone. Our findings highlight the influence that managers can exert on corporate transparency with the use of linguistic tone in financial reports.

Suggested Citation

  • Yao, Kai & Chevapatrakul, Thanaset & Nguyen, Thach Vu Hong & Yin, Shiyan, 2026. "Uncertainty words and corporate information environment," Research in International Business and Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:riibaf:v:81:y:2026:i:c:s0275531925004507
    DOI: 10.1016/j.ribaf.2025.103194
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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