Impact of Workplace-related Accidents on the Usage of Negative Words in 10-K Filings

In this study, we examine the association between corporate workplace safety and narrative disclosure. Specifically, we analyze the negative word usage in 10-K filings depending on the injury/illness rates. Using data from the Occupational Safety and Health Administration (OSHA), we find that firms with higher injury/illness rates are less likely to use negative words in their annual reports. Seeking the underlying reasons, we indeed find a higher usage of negative words in 10-K filings and higher rates of injuries, negatively affecting the firm’s future value. Additionally, the tendency to reduce negative words is stronger for firms led by CEOs with higher career concerns. We also find that when firms highly use negative words in their annual reports, it negatively impacts the readability of annual reporting, especially when they are also experiencing a higher number of injuries. Our findings remain robust even after conducting change analysis, propensity score matching, entropy balancing, and various fixed effects. Overall, our results suggest workplace safety practices influence its annual reports, and managers may strategically use their narratives to mitigate adverse impact from injury/illness in their workplace.