Abstract/Summary

Numerous studies have examined Narrative Disclosure Tone (NDT) in different channels of financial reporting over the past decade. Our review of 64 studies aims to analyze tone measurements and areas of debate in NDT literature to suggest avenues for future research. First, we discuss previous studies that have compared tone measures based on alternative wordlists and shown that tone measures using domain-specific dictionaries are more powerful than those based on general dictionaries. However, future research should benefit from the advanced methods considering natural language processing mechanisms and the meanings rather than word frequency for more accuracy. Second, from the theoretical perspective, studies that linked psychological theories to the tone context are limited. Therefore, we call for more evidences from the upper echelons theory considering the interdependencies between executives. Finally, we critically review different directions of NDT studies and highlight areas for future research. Mainly, investigating the determinant of NDT requires a more comprehensive investigation considering top managers-specific characteristics, tax avoidance, audit quality, social capital and narrative regulatory settings. In addition, we call for more research about tone consistency among different channels of disclosures in companies’ communications with stakeholders.