Finance Research Seminar – Dr Jose Liu

Title: Peer Effects on Disclosure Tone: Evidence from a High-Discretion Reporting Environment

Date: 2 December 2026

Time: 14:00 to 15:00

Venue: FDC.1.16

If you would like to attend, please register using the following link

Peer Effects on Disclosure Tone: Evidence from a High-Discretion Reporting Environment

Speake: Dr Jose Liu, Newcastle University

Profile | Newcastle University

Abstract:

Recent work establishes that peer firms influence corporate disclosure decisions and disclosure timing, yet whether peers shape the qualitative texture of disclosure, specifically the tone of narrative reporting, remains unexplored. We study this question in China, where MD&A filings are subject to no prescriptive tone or readability standards, creating a high-discretion environment in which peer imitation in language is both feasible and incentivized. Using 28,710 firm year observations over 2004 to 2019 and an instrumental variable strategy based on peer idiosyncratic equity shocks, we find that firms adopt a more positive MD&A tone when industry peers do the same. The effect is directionally asymmetric: follower firms adjust their tone toward industry leaders, but leaders do not reciprocate, consistent with information-based learning rather than rivalry-based predation. Peer tone influence concentrates among firms facing intense competition, thin analyst coverage, and weak governance. Mechanism-consistent evidence indicates that tone convergence is sustained by coordinated adjustments at both the textual level (lexical, thematic, and semantic imitation) and the accounting level (earnings management that supports narrative optimism). Our findings reveal that the narrative signals reaching investors are partly shaped by what competing firms choose to say.