Can institutional investors effectively identify management sentiment?A study based on textual sentiment of management discussion and analysis
Management discussion and analysis(MD&A)is a crucial reference for investment decision-making because it provides investors with forward-looking information about a company's future operations and potential risks.However,there is controversy over information effects and opportunism in practice.This study,based on data from listed companies on the Shanghai and Shenzhen stock exchanges between 2010 and 2020,focuses on the effectiveness of sentiment information and institutional investors'ability to identify it.The study finds that:(1)Overall,management sentiment information is effective.More positive net sentiment forecasts better future company performance and excess stock returns.(2)Institutional investors can generally identify management sentiment information effectively,with their current shareholding proportion and its changes being positively correlated with management sentiment.This demonstrates their capacity for advance investment decision-making compared to the market.(3)When management sentiment goes contrary to the direction of company performance,the effectiveness of sentiment information diminishes,leading to reduced forecasts of future company performance and excess stock returns.Moreover,institutional investors are able to significantly reduce their investment incentives in the current period,which further validates their effective identification and response to management sentiment manipulation issues.The study supports the effective identification of management sentiment information by institutional investors.It also emphasizes the need to incorporate MD&A text information into regulation to curb management opportunism and enhance market efficiency.
NETL
NSTL
万方数据
