Geopolitical risk and corporate disclosure tone: evidence from China

Using a sample of Chinese listed firms, this letter investigates the impact of geopolitical risk (GPR) on corporate disclosure tone. We document a robust positive relationship, indicating that managers adopt a more optimistic tone when facing higher GPR. This finding aligns with strategic impression management motives. Furthermore, we document a distinct asymmetric effect: managers defensively inflate their tone during risk spikes, but actively deflate the tone back to realistic levels during risk relief. Mechanism tests reveal that this strategic manipulation is significantly constrained by external monitoring mechanisms, specifically institutional ownership, analyst coverage, and Big 4 auditing.