The effect of annual reports tone complexity on firms' dividend policy: evidence from the United States

dc.contributor.authorid0000-0002-2432-0477
dc.contributor.coauthorSatt, Harit
dc.contributor.coauthorIatridis, George
dc.contributor.departmentN/A
dc.contributor.kuauthorIatridis, George Emmanuel
dc.contributor.kuprofileOther
dc.contributor.schoolcollegeinstituteCollege of Administrative Sciences and Economics
dc.date.accessioned2025-01-19T10:31:31Z
dc.date.issued2023
dc.description.abstractPurpose: This paper investigates the impact of annual reports complexity (associated with tone complexity) on dividend policy and value of dividend policy. Design/methodology/approach: This paper uses the variable complexity provided by the textual analytics software (Diction 7.0) as the proxy for annual reports' tone complexity. The data covered non-financial American firms from years 2011–2019. The pooled ordinary least squares (OLS) regression and the instrumental variable regression are used to test the study’s arguments. Findings: The findings suggest that the signaling theory of dividends holds in the United States. Firms with more complex annual reports tend to distribute more dividends, mainly in environment of high information. When information asymmetry is high, managers would use dividends as a tool to mitigate information asymmetry. Furthermore, the findings suggest that dividend policy has a stronger impact on firm value, especially when the tones of annual reports are highly complex. These findings support the previous results, namely, that managers would opt for dividend policy as a signaling tool for its positive impact on firm value. The results are robust to potential endogeneity issues and alternative proxies for both dividend policy and information asymmetry. Practical implications: The results demonstrate that the dividends' signaling theory holds in the United States, where the findings cannot be generalized to all markets; However, the findings of this research can be of use to potential and current investors, users of annual reports and decision makers as well. Originality/value: The paper highlights the effect of the tone complexity of annual reports (using 10K text analytics) on the value of dividend policy and dividend policy itself in a developed economy. Understanding this relation will enable stakeholders to forecast future dividends, choose more appropriate valuation methods and hence restore investors' faith. © 2021, Emerald Publishing Limited.
dc.description.indexedbyWoS
dc.description.indexedbyScopus
dc.description.issue4
dc.description.publisherscopeInternational
dc.description.volume15
dc.identifier.doi10.1108/RBF-12-2021-0262
dc.identifier.eissn1940-5987
dc.identifier.issn19405979
dc.identifier.quartileQ2
dc.identifier.scopus2-s2.0-85124765225
dc.identifier.urihttps://doi.org/10.1108/RBF-12-2021-0262
dc.identifier.urihttps://hdl.handle.net/20.500.14288/26260
dc.identifier.wos759962900001
dc.keywordsAnnual reports
dc.keywordsDividend policy
dc.keywordsInformation asymmetry
dc.keywordsTone complexity
dc.keywordsValue of dividend policy
dc.keywordsPayout Policy
dc.keywordsShare repurchase
dc.keywordsOwnership
dc.languageen
dc.publisherEmerald Publishing
dc.sourceReview of Behavioral Finance
dc.subjectBusiness
dc.subjectFinance
dc.titleThe effect of annual reports tone complexity on firms' dividend policy: evidence from the United States
dc.typeJournal Article

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