This thesis aims to assess and explain the existence of a relationship between Financial Narratives and Stock Price Abnormal Returns in the report publication period. More specifically, Ordinary Least Squares (OLS) regressions are performed to test the relationship between Abnormal Returns (AR) and three Financial Narratives characteristics – Tone, Forward-Looking Disclosure (FLD) and Complexity – controlling for effects such as Size, Book-to-Market, Leverage, Revenues Growth, Investment, Free Float, Return-on-Equity, Dividend Yield, Analysts’ Number, and Surprise Earnings. The study is strengthened by a Sensitivity Analysis and Robustness Tests. Results show high evidence of an impact from Net Tone and FLD on AR and fail to evidence the same for Complexity. It is concluded that the higher the Net Tone from the Management Discussion and Analysis’ (MD&A) section, Chairman’s section and from the Aggregated Review, the higher the AR will be and that the higher the FLD, the lower the AR will be. Finally, this study creates value as the incorporation of a large sample (13,855 observations) from 2,137 London Stock Exchange (LSE) listed firms entails scientific relevance for the assessment of Financial Narratives into Stock Prices, allowing different entities to understand disclosure behaviours and contributing to a growing research field by filling a study gap.
Date of Award | 15 Jul 2024 |
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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
- Stock prices
- Abnormal returns
The relationship between financial narratives and abnormal returns
Tavares, A. T. W. G. D. L. (Student). 15 Jul 2024
Student thesis: Master's Thesis