Difference analysis in the topics discussed by international and American firms in their EPRs: a materiality analysis of EPR’s through a topic modeling approach.

Details

Supervisors

Thewissen, James

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

The basis of this paper is to study the differences in the earnings press releases (EPRs) of Cross-listed and American firms in terms of qualitative data content and the investors’ materiality linked to it. To identify the thematic content of these EPRs, a topic modeling method named “Latent Dirichlet Allocation” (LDA) was used. Based on a sample of 17.000 EPRs ranging from 2004 to 2020, the LDA method allowed us to establish 12 relevant topics of 10 words each on which the analyses were based. Then, the 12 topics identified were classified into two categories: financial and non-financial, and we observed that cross-listed firms tend to discuss more financial related topics in their EPRs. However, neither category seems to have an impact on investors’ confidence. Therefore, further analyses were conducted and showed that, taken individually, some topics would increase investors’ materiality for both US and cross-listed firms. Indeed, we discovered that some topics, and thus words linked to it, could have a positive impact on investors’ confidence and, conversely, some could have a negative impact. This shows that the choice of words in an EPR can have an impact on investors’ confidence, and these words differ among American or cross listed companies. A second observation showed that cross-listed firms tend to have a greater topic diversity in their EPRs compared to US firms, despite the lack of direct impact on investors’ materiality.