Managerial Self-References in Corporate Disclosures: An Analysis of MD&A

This study examines strategic pronoun usage in the Management Discussion and Analysis (MD&A) section of annual reports. Through automated textual analysis of a large sample of MD&As, we find that managers of firms with higher earnings growth tend to use more self-inclusive pronouns(e.g., “ we, ” “ us, ” and “ our ”) and fewer self-exclusive words (e.g., “the company ”). This self-referential language pattern is associated with a higher likelihood of future financial restatements. Our findings contribute to the literature on corporate narrative disclosures and identify a potential new indicator of financial misstatements. The results have implications for investors, analysts, auditors, and regulators.