Purpose

As an important part of the disclosure of listed companies' annual reports, MD&A will disclose some "bad news" about the company. The purpose of this paper is to study whether such "bad news" can reduce information asymmetry and alleviate the risk of stock price crash remains to be seen.

Design/methodology/approach

Based on the sample of A-share listed companies from 2007 to 2016, the authors examine whether the negative information in MD&A could reduce stock price crash risk.

Findings

It is found that the negative information in MD&A does not reduce future crash, which indicates that the negative information in MD&A does not alleviate the information asymmetry. Further, it is also found this is due to the low readability of negative information which leads to the negative information not successfully released into the market timely. Only highly readable negative information can alleviate information asymmetry and suppress crash risk. In addition, the authors also find in the companies with more investor surveys negative tone is negatively correlated with crash risk, which means that investor surveys could help investors interpret the negative information in MD&A and alleviate stock price crash risk.

Practical implications

The practical significance of this article: this paper suggests that investors should carefully identify the quality of negative information in MD&A and pay attention to other quality characteristics besides credibility. This paper suggests that the regulator should pay attention not only to whether to disclose and the amount of disclosure but also to the quality of information disclosure, such as readability, so as to restrict management's strategic behavior in information disclosure.

Originality/value

First, different from previous studies on the impact of information disclosure on crash risk, this paper directly explores the impact of information in MD&A on stock price crash risk from the perspective of negative information disclosure that management most want to hide. It supplements the literature on the impact of information disclosure on stock price crash risk. Second, this paper studies the interaction between information tone and readability and its impact on the risk of stock price crash. Some studies believe that the credibility of negative news is higher and investors' reaction may be stronger. However, this paper finds that the disclosure of negative information may not be absorbed by the market because of the low readability. Third, this paper finds that investor surveys can help information users to interpret negative information and alleviate the risk of stock price crash, which shows that information disclosure of different channels will complement each other and improve information efficiency. Therefore, it advocates different information disclosure channels which has important practical significance for improving market pricing efficiency and reducing investment decision-making risk.

中文翻译：

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MD&A 中的负面信息是否可以降低股灾风险？

目的

作为上市公司年报披露的重要组成部分，MD&A会披露一些关于公司的“坏消息”。本文的目的是研究这样的“坏消息”能否减少信息不对称，减轻股价暴跌的风险，还有待观察。

设计/方法/方法

作者基于2007-2016年A股上市公司样本，检验MD&A中的负面信息是否可以降低股价崩盘风险。

发现

发现MD&A中的负面信息并没有减少未来的崩溃，说明MD&A中的负面信息并没有缓解信息不对称。此外，还发现这是由于负面信息的可读性低，导致负面信息未能及时发布到市场。只有可读性强的负面信息才能缓解信息不对称，抑制崩溃风险。此外，作者还发现，在投资者调查较多的公司中，负面基调与崩盘风险呈负相关，这意味着投资者调查可以帮助投资者解读MD&A中的负面信息，缓解股价崩盘风险。

实际影响

本文的现实意义：本文建议投资者谨慎识别MD&A中负面信息的质量，关注可信度以外的其他质量特征。本文建议监管者不仅要关注是否披露和披露的数量，还要关注信息披露的质量，如可读性，以限制管理层在信息披露中的战略行为。

原创性/价值

首先，不同于以往关于信息披露对崩盘风险影响的研究，本文从管理层最想隐瞒的负面信息披露的角度，直接探讨MD&A中的信息对股价崩盘风险的影响。补充了信息披露对股价崩盘风险影响的文献。其次，本文研究了信息基调和可读性之间的相互作用及其对股价暴跌风险的影响。一些研究认为，负面消息的可信度更高，投资者的反应可能更强烈。然而，本文发现负面信息的披露可能因为可读性低而不会被市场吸收。第三，本文发现投资者调查可以帮助信息使用者解读负面信息，降低股价暴跌风险，表明不同渠道的信息披露会相互补充，提高信息效率。因此，倡导不同的信息披露渠道，对于提高市场定价效率、降低投资决策风险具有重要的现实意义。