Authors: Virginia Sotiropoulou, Dimitris Tzelepis

Title: The information content of corporate disclosures before and after the Sarbanes-Oxley Act: A textual and financial analysis of firm performance

Abstract

This paper attempts to examine whether there is a systematic change in the informativeness of annual reports after the Sarbanes-Oxley Act and SEC regulations of 2003 that required an increase in the information that is provided in corporate disclosures. The following research questions are examined: whether there is a change in the information content in annual reports’ tone over time and specifically after the Sarbanes-Oxley Act and SEC regulations of 2003 and whether there is a systematic change in the information content of quantified textual information of annual reports (percentage of positive, negative, uncertainty, modal weak, modal moderate, modal strong words as well as file size) after these regulations. The sample consists of annual reports of U.S. companies from 1994 to 2017. Financial data are retrieved from Compustat database. Dictionary method is used to process textual information. Findings of this paper suggest that there is a change in the information content of reports’ tone over time. However, tone of 10-Ks has become less informative about performance after the Sarbanes-Oxley Act and SEC’s regulations. The informativeness of quantified textual information about performance has increased over time.