The informativeness of corporate disclosures similarity - An analysis of CEO letters to shareholders

Details

Supervisors

Thewissen, James

Faculty

Louvain School of Management

Degree label

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

Abstract

The objective of this thesis is to study the similarity between the letters written by CEOs to their shareholders. We also examine the informativeness of that similarity and try to determine to which extent similarity is relevant for assessing the future performance of a company. After addressing the issues of financial disclosure and the informativeness of similarity between texts, we perform a qualitative analysis. The first step of this qualitative analysis consists in analysing the evolution of similarity between CEO letters over the years. It allows us to compare the two similarity measurement methods that we have used, the ‘Jaccard’ similarity index and the ‘Cosine’ similarity measure. In the second step of the qualitative analysis, we look at the predictive effect of similarity on the future return on assets of companies, which is the indicator that we have chosen to evaluate their performance. Our investigation reveals that, from year to year, similarity scores tend to increase more times than they decrease. We also show that similarity scores tend to change when there is a change of CEO within a company. However, we have difficulty finding any significant predictive effect of similarity on future company performance.