Operational performance and disclosure tone

Our paper examines whether operational performance, as measured by technical efficiency, is reflected in corporate disclosure tone. In addition, we analyze which dimensions of operational performance most concern managers and whether they are reflected in the tone of corporate reports. In particular, we investigate whether balances/imbalances in levels of efficiency are reflected in the tone of corporate reports. Using disclosure narratives of the annual reports of 4,348 US companies for the period 1993–2021, we find that better operational performance is generally related to larger levels of positive tone (generated by including less negativity), less uncertainty, and less hesitancy in disclosure tone. We also find that balances in efficiency reflect operational performance, while imbalances are not related to narrative tone in the way one would expect, which seems to indicate a more strategic managerial disclosure approach.