What question did this study set out to answer?

The study aims to understand how the tone of annual reports influences market attention and the role of financial performance metrics.

April 6, 2026

The Textual Tone of Annual Reports and Market Attention: Evidence From Chinese Listed Companies

Key Points

The study aims to understand how the tone of annual reports influences market attention and the role of financial performance metrics.
Analyzed annual reports from Chinese A-share listed firms between 2007 and 2022.
Examined the relationship between report tone and market attention.
Investigated moderation effects of firm profitability, firm size, and Tobin's Q.
Positive tone in annual reports significantly increases market attention.
Stronger firm profitability enhances the effect of positive tone on market attention.
Larger firm size and higher Tobin's Q decrease the positive tone's effect.

Abstract

ABSTRACT This study examines how the textual tone of annual reports shapes market attention and investigates the moderating effect of firm profitability, firm size, and Tobin's Q. Based on a comprehensive sample of Chinese A‐share listed firms from 2007 to 2022, we find that a positive tone in annual reports significantly increases market attention. Moreover, firm profit strengthens this relationship, whereas firm size and Tobin's Q weaken it. These results suggest that the credibility and effectiveness of a positive tone are enhanced when corroborated by strong financial performance. Our findings remain robust to alternative variable measurements, endogeneity tests, and multiple sample specifications. This research contributes to signaling theory and impression management literature by identifying a critical boundary condition for the efficacy of tonal strategies, with important implications for investors, regulators, and corporate disclosure practices.

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