This study analyses the impact of narrative measures, specifically tone, the number of forward-looking words, and the complexity of annual reports on residual returns. Multivariate models were performed using the annual residual returns generated by the Fama-French 3-factor model and the narrative features of various report sections, including the Management Discussion and Analysis (MD&A), CEO Review, Chairman’s Statement, and Operational & Financial Review. Despite the lack of impact of tone of every section on the residual returns, the forward-looking words of the CEO Review and the complexity of the Operational & Financial Review were found to be significant. This highlights the potential for investors to enhance their valuations of companies and make better informed decisions by taking these factors into consideration.
| Date of Award | 14 Jul 2023 |
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| Original language | English |
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| Awarding Institution | - Universidade Católica Portuguesa
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| Supervisor | Paulo Alves (Supervisor) |
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- Financial narratives
- Tone
- Forward-looking
- Complexity
- Disclosures
- Annual reports
- Residual returns
- Firm valuation
- Information asymmetry
Can financial narratives explain residual returns?: evidence from UK FTSE350 non-financial firms
Machado, J. G. (Student). 14 Jul 2023
Student thesis: Master's Thesis