Essays on corporate disclosure

This dissertation investigates how managers strategically shape narratives in earnings conference calls in two essays. Chapter 2 examines the influence of product market competition on managers’ narratives about firm-specific conditions and industry conditions. Using large language models, I develop novel measures that separately capture these two types of narrative content. I predict and find that, to deter competitors, managers face distinct incentives in these two types of narratives. When facing competitive threats, managers highlight firm-specific advantages to signal that direct competition would be costly, while emphasizing industry-wide disadvantages to suggest that market entry is unattractive. These findings help explain the mixed results in prior research by showing that competition affects firm-specific and industry-wide narratives in systematically different ways. Chapter 3, coauthored with Professor Kin Lo, examines the role of linguistic style in disclosure. Using a formality measure from linguistics, this chapter tests whether informal language in earnings conference calls clarifies or obscures information. We find that informal language is associated with increased disagreement among investors and analysts exposed to such language, suggesting that it does not improve clarity. Further analysis shows that informal language is associated with lower subsequent earnings, more negative earnings surprises, and lower returns around subsequent earnings announcements. These findings are consistent with the view that managers use informal language not to enhance clarity but to strategically obscure bad news. This chapter contributes to our understanding of linguistic choices in corporate disclosure and introduces a new linguistic measure to the accounting and finance literature. Collectively, these essays show how managers use both narrative content and style as strategic tools to shape competitors’ and investors’ perceptions.