Abstract
It is unclear how valuable textual disclosures from peers are to a firm’s investment decisions in emerging markets. Using a dataset of Chinese listed firms from 2007 to 2019, the results show that peers’ MD&A tone has a significant and positive effect on corporate investment, supporting the incremental information content hypothesis in emerging markets. A one standard deviation increase in peers’ tone raises investment by about 5%. Further analyses show the effect of peers’ tone on investment is higher when peers’ disclosure quality is higher, the firm’s management has a stronger motivation to learn, or the industry competitiveness is greater. After addressing the endogeneity problem, ruling out alternative explanations, and a series of robustness tests, the results remain consistent. This paper confirms the value of textual disclosures and enriches the study of their economic consequences in emerging markets.
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