The Review of Corporate Finance Studies 2025
Speculative and Informative: Lessons from Market Reactions to Speculation Cues
Abstract
Speculative language in corporate disclosures can convey valuable information about firms’ fundamentals. We evaluate this idea by developing a measure for speculative statements based on sentences marked with the “weasel tag” on Wikipedia. In the 16-week test period after filing, greater use of speculative statements in 10-Ks predicts higher and nonreverting abnormal returns, more insider and informed buying, and higher news sentiment. These findings imply that managers’ usage of speculative language in 10-Ks reflects voluntary disclosure of their private information about the positive prospects of events when market implications of the events are uncertain and thus have room for (re)interpretation.
- DOI
- 10.1093/rcfs/cfaf021
- Language
- en
- Sources
- openalex crossref