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Tone disclosure and financial performance: evidence from Egypt

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This paper examines to what extent financial performance (FP) represents one of the main determinants for tone disclosure (TD) in Egyptian annual reports. We also measure the bidirectional relationship between TD and FP. We use the manual content analysis to measure levels of TD in annual reports for a sample of 105 firms listed on the Egyptian stock market. Our sample covers a three-year period (2011–2013). Our descriptive analysis shows that Egyptian firms disclose more good news than bad news. Therefore, the net news disclosure, or net variances, between good/bad is positive. The empirical analysis shows a positive association between the narrative disclosure of good/bad news and FP based on return on assets (ROA). We also find a highly significant association between the auditor, profitability, leverage, firm growth and financial reporting of good/bad news information. Finally, the results of the ordinary least squares (OLS) regression show that the causality between the two endogenous variables runs from FP to TD . Thus, TD is determined by FP. We offer a novel contribution to disclosure studies by being the first study to examine tone disclosure in one of the developing countries.
Original languageEnglish
JournalAccounting Research Journal
StateAccepted for publication - 28 Jun 2017

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