Information Environment,Incremental Information Dis-closure of Listed Companies and Capital Market Pricing Efficiency:A Study Based on MD&A Text Similarity
The quality of accounting information disclosure by listed companies directly affects the interests of information users and deter-mines the efficiency and effectiveness of the capital market.Although China has already constructed a system of securities information dis-closure system including Securities Law and Administrative Measures for Information Disclosure of Listed Companies,cases of illegal and ir-regular disclosure of information by listed companies are still emerging one after another,which seriously hit the confidence of investors and damage the ecological environment of the capital market,so how to im-prove the pricing efficiency of the capital market from the perspective of information disclosure has become an urgent problem to be solved.The voluntary disclosure of information by the company can effec-tively alleviate the degree of asymmetry between the company and the information users,and thus enhance the pricing efficiency of the capital market.The annual report,as an important document disclosed by the company,contains information on the company's financial po-sition,operating results and cash flow for the entire fiscal year,which is a bridge for communication between management and investors and one of the most important ways for investors to obtain information.Further,management discussion and analysis(hereinafter referred to as MD&A),as the essence part of non-financial information in the annual report,includes both the explanations and analyses by the management of the listed company of the company's historical operating informa-tion,as well as the forecasts and outlooks of the opportunities,risks and challenges facing the company's future development,and its disclosure quality will alleviate the asymmetry of information to varying degrees.Based on a sample of A-share listed companies in China's Shanghai and Shenzhen markets from 2007 to 2020,this paper uses text analysis method to investigate the relationship between incremental information disclosure and capital market pricing efficiency,and measures the level of incremental information disclosure of listed companies by the simi-larity between the MD&A text in the current period's annual report and the previous period's MD&A text.It is found that the higher the simi-larity of the MD&A text disclosed by the company,which means the less incremental information disclosure,the higher the synchronization of the company's stock price and the higher the risk of stock price crash.It is further found that the effect of MD&A text similarity in aggravat-ing a company's stock price synchronization and stock price crash risk intensifies when the company's internal and external information envi-ronment is poorer,such as less readable MD&A,less use of new media,lower audit quality,and less media coverage.The contributions of this paper are as follows:First,this paper inter-prets the causes of stock price synchronicity and stock price collapse risk based on the incremental information perspective of textual in-formation disclosed by firms and is different from the existing studies that focus on textual horizontal incremental information,i.e.,the idio-syncratic information disclosed by firms'MD&A that is different from other firms in the same industry and market.This paper focuses on the fact that the information in the text of corporate disclosure has its own before and after changes,and selects the similarity index between the current period's MD&A and the previous period's MD&A text to ex-plore the relationship between the longitudinal incremental information and the efficiency of pricing in the capital market,which then expands the related research field.Secondly,when exploring the information content of annual report texts,the existing literature mainly focuses on whether the text of annual reports contains specific types of informa-tion,such as market competition,macro environment,etc.,or compares the text of annual reports disclosed by companies with their peers in the same industry,whereas in the field of textual longitudinal informa-tion research,it mainly explores the relationship between the content of longitudinal information and the cost of equity capital,penalties for non-compliance,and credit risk.This paper expands the research on textual longitudinal information from the level of capital market pricing efficiency,and at the same time organically combines MD&A textual information similarity with internal and external information environ-ment to reveal the moderating role of internal and external information environment,which enriches the field of research on the information effect of MD&A textual information similarity and internal and exter-nal information environment.
Information EnvironmentText SimilarityStock Price SynchronicityStock Price Crash Risk
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