Corporate Financial Information Environment (CFIE)

CFIE project aims and objectives

The project studied how the CFIE is shaped by the actions of the financial media. Despite voluminous amounts of press commentary and published investment advice, the informativeness of financial media outputs and their impact on management behaviour have not been studied systematically. We have developed methods for measuring the content and informativeness of press commentaries, and then used these measures to examine how the financial media interacts with corporate reporting to determine the quality of the CFIE.

The majority of our analysis has been based on large samples of UK firms listed on the London Stock Exchange. We have used complex statistical modelling procedures to explore relations between key variables and to test our predictions. Our statistical tests have been supported by interviews with key stakeholder groups to help us better understand current financial communication issues and practices. Insights from these interviews have been used to refine our research questions and interpret our results.

The project has five primary objectives:
  1. To advance research on the lexical properties and narrative aspects of corporate disclosures by developing a suite of statistical natural language processing (NLP) tools for analysing firms' narrative communication practices.
  2. To use the methods developed in objective 1 to measure the linguistic characteristics of key corporate disclosures (both mandatory and voluntary), to identify determinants of cross-sectional variation in these characteristics, and to relate these characteristics to disclosure informativeness. Analysis of the content of interim management statements will form a specific application of these methods.
  3. To apply the methods developed in objective 1 to advance research on the interactions between corporate voluntary disclosures and accounting quality, including new work on the joint effects of corporate disclosure and earnings management practices on share price anticipation of earnings and companies' standing in published rankings of investor relations quality.
  4. To apply NLP scoring methods to UK corporate news stories in the financial media with the aim of developing a more complete measure of corporate financial communications quality.
  5. To use the methods and insights from objectives 1 to 4 to provide new evidence on the links between earnings quality, disclosure quality, and cost of capital.

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This page last modified on Wednesday 30 September 2015 at 10:06 am .