Financial statement adequacy and firms' MD&A disclosures
Stephen V. Brown, Lisa A. Hinson, Jennifer Wu Tucker
Contemporary Accounting Research · 2024 · Volume 41 · Issue 1
Abstract
Firms are required to provide financial information via the financial statements and the management discussion and analysis (MD&A), a narrative explanation of the financial statements. Our study examines how firms use the MD&A channel when their financial statement channel is inadequate. We focus on two textual attributes of the MD&A: non-GAAP disclosure and forward-looking statements. We find that firms with less adequate financial statements discuss non-GAAP measures more and provide a larger number of forward-looking statements. We then identify the topics, and therefore the context, in which non-GAAP and forward-looking disclosures are provided. Our study provides evidence onhowmanagers use the MD&A, a relatively more flexible channel, to provide information when their financial statement channel is less adequate.
Keywords
deep learning, disclosure, machine learning, MD&A, text segmentation, topic analysis, analyse thématique, apprentissage automatique, apprentissage profond, communication d’information, rapport de gestion, segmentation de texte
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