경영진단의견서(MD&A)의 전기와 당기 유사성과 정보유용성

The informativeness of MD&A section in the annual report has been challenged by the authority. MD&A needs to provide useful information to investors by disclosing the managers’ evaluation and forecast on the current and future performance of the firm. The premise of the informativeness of MD&A lies in that it should reflect the changes in firm’s business timely. In this paper, we examine the extent to which the sentences from the MD&A are similar each other compared to those in the previous year, and firms’ overall efforts to improve the informativeness of disclosures mitigate such similarity. Using a sample of Korean listed firms from 1999 to 2018, we show that around 40% of sentences from the MD&A disclosure are same to those in previous year’s MD&A, and the median cosine similarity is 0.87. Consistent with the concern that the informativeness will be weaker when the similarity is higher, we find that the tone of MD&A sentences is associated with future firm performance only for the sentences with low similarity. Such similarity implies that most of the sentences in the MD&A disclosures are stale and less likely to provide useful information to information users. We find that firms’ efforts to improve overall disclosure quality reduce the similarity. Overall, these results show that the sentence similarity can be a useful measure for the MD&A quality, and that such similarity should be carefully addressed in the future textual research using the MD&A section.