Textual Disclosures by REITs in an Environment of Extreme Uncertainty

We study the linguistic style of company textual disclosures in an environment of extreme uncertainty by using the COVID-19 pandemic as the setting. Disclosures in the Management Discussion and Analysis (MD&A) section of a company report provide forward-looking information and are used by investors to make decisions. Using a multi-dimensional perspective, we analyze textual disclosures by Real Estate Investment Trusts (REITs) in the United States between 2017 and 2022 to determine the changes associated with the pandemic. We find that, after March 2020, (i) the length of disclosures increases; (ii) their tone becomes more negative; (iii) the uncertainty expressed in the disclosures increases; (iv) they become less readable; and (v) the level of boiler plating falls. We also find that there are significant differences across different types of REITs and that changes in the different measures are correlated. Our analysis of earnings forecasts by financial analysts shows that the indirect effect of the pandemic on forecast errors, mediated by changes in disclosures, is statistically and economically significant. Our results contribute to debates on the impact of the pandemic, as well as on the significance and informativeness of disclosures.