Executive Takeaways
■ Textual analysis can quantify soft information conveyed in prospectus filings. ■ Uncertain and weak modal tones in a firm’s filing cast a negative light on the firm. ■ SEO firms at higher risk for litigation use more cautionary tones. ■ SEO firms use more cautionary language since the passage of the Sarbanes-Oxley Act. ■ Risk disclosures using cautionary words provide useful information to investors.
Rongbing Huang, Professor of Finance
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