Research On The Impact Of Annual Report Tone On Stock Price Crash Ris

In recent years,some studies have found that management manipulates the tone of text to conceal negative news within the company,mislead investors’ judgement on the company’s fundamentals,and seek benefits for themselves.Specifically,due to the broad audience,high attention,continuity,periodicity,and standardization of annual reports,they are more likely to become a tool for management to manipulate tones.The manipulation of tone in annual reports may temporarily drive up the stock price,but once investors become aware of the hidden truth,panic selling of stocks often occurs,leading to a stock market crash.In addition,the structure of Chinese investors shows that there are more individual investors and fewer institutional investors.Individual investors have poor ability to obtain and process information,making them more susceptible to annual report tone manipulation in the short term,which leads to increased stock market crash risk.This article selects non-financial listed companies in China’s A-share market from 2008 to 2020 as research objects,and empirically studies the relationship between annual report tone and stock price crash risk.Furthermore,this article uses the level of risk disclosure in annual reports as a moderating variable to explore its moderating effect between annual report tone and stock price crash risk.Finally,the data is grouped according to the level of shareholding by institutional shareholders to verify the heterogeneity in the relationship between annual report tone and stock price crash risk under different levels of institutional shareholder shareholding.In terms of the mechanisms,this article examines the intermediate effects of operating risk and financing constraints in the relationship between annual report tone manipulation and stock price crash risk,and then examines the relationship between annual report tone and the opacity of company internal and external information.The research results show that: First,from the basic model regression results,it is known that from 2008 to 2020,there is a significant positive relationship between annual report tone and stock price crash risk.The more positive the tone of the annual report of a listed company,the greater its potential risk of stock price crash in the future.Second,from the regression results of the square term of annual report tone,it is known that there is a significant U-shaped relationship between annual report tone and future stock price crash risk,which is consistent with the results of grouping regression.Meanwhile,the regression results of anomalous text tone constructed after eliminating company fundamental information show that the higher the deviation of the annual report text tone from the company fundamentals,the higher the risk of stock price crash.After replacing the tone measurement index,the above conclusions remain robust.Third,from the results of moderation effects,the interaction term of risk disclosure and stock price crash risk has a significant negative correlation.A high level of risk disclosure represents higher quality of annual report information disclosure,which can alleviate the impact of annual report tone manipulation on stock price crash.Fourth,in the grouping test,the empirical results of this article show that the impact of annual report tone on stock price crash risk is to some extent subject to the proportion of institutional investors holding shares.In companies with a lower proportion of institutional investor shareholding,the impact of annual report tone on stock price crash risk is more significant.Fifth,from the results of the mediating effects test,it is known that annual report tone manipulation will increase operating risk and financing constraints.When operating risk increases,it is easy to trigger a stock market crash,and operating risk plays an intermediary role.High financing constraints can reduce stock price crash risk,and financing constraints are also an intermediary variable for annual report tone’s impact on stock price crash risk.Additionally,annual report tone can also increase the opacity of listed companies’ information.