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Contemporary Accounting Research Vol. 41 No. 4 2024

Aggregate tone and gross domestic product

Elizabeth Demers1; Fabio B. Gaertner2; Asad Kausar3; Heather Li4; Logan B. Steele5

1 School of Accounting & Finance University of Waterloo Waterloo Ontario Canada · 2 Department of Accounting and Information Systems, Wisconsin School of Business University of Wisconsin–Madison Madison Wisconsin USA · 3 Accounting Department, Kogod School of Business American University Washington DC USA · 4 Department of Accounting Bentley University Waltham Massachusetts USA · 5 College of Business Oregon State University Corvallis Oregon USA

open access

Abstract

We examine whether the change in earnings announcement textual tone, aggregated across individual publicly traded firms, helps predict gross domestic product (GDP) growth. The literature finds that changes in aggregate accounting earnings do help predict GDP growth, but only when aggregate earnings changes are negative. Because conservative accounting rules limit managers' ability to communicate positive news promptly, we examine the tone of quarterly corporate earnings announcements as a possible source of timely positive information provided by firms. We find that the change in aggregate tone in the earnings announcements from the same quarter in the previous year predicts one‐quarter‐ahead GDP growth, but only when the change is positive. Our study contributes to the literature by investigating the relation between aggregate corporate disclosure tone and macroeconomic outcomes.

DOI
10.1111/1911-3846.12996
Volume
41
Issue
4
Pages
2574-2599
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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