Finding the Narrative in the Numbers: Long-Term Investors’ Demand for Accounting Information

• In Event: Doctoral Student-Faculty Interchange: Financial Reporting II

Abstract

I study the MD&A section of 10-K filings and use disclosed numbers within the text of corporate
narratives to proxy for the qualities of information that are likely demanded by long-term investors.
I hypothesize and show that the prevalence of quantitative information in firms’ written
communication is positively associated with long-term institutional ownership. I show that
numbers capture a dimension of business communication that is opposite in direction to a shortterm
disclosure horizon. Further tests suggest that current levels of disclosed numbers are relevant
predictors of future changes in long-term ownership, but that present levels of long-term investors
have no power in explaining future changes in numbers.

Author

• Federico Siano, Boston University