Does managerial tone matter for stock liquidity? Evidence from textual disclosures

This study investigates the effect of managerial tone on stock liquidity using a sample of U.S.-listed firms over the 1994–2019 period. We find that firms with SEC filings exhibiting more positive managerial tone experience higher stock liquidity. Our findings remain unchanged after controlling for firm fixed effects, investor sentiment, firm size differences and using alternative variable approaches. Further, we identify that the relationship is less pronounced during times of high policy uncertainty measured by EPU and presidential elections. Overall, this paper provides evidence that the management tone in SEC filings has price discovery and efficiency implications for investor trading decisions.