Measuring Inconsistencies in Research and Development Descriptions in Annual Reports of Listed Companies
Journal Title: Journal of Organizations, Technology and Entrepreneurship - Year 2024, Vol 2, Issue 3
Abstract
The descriptions of Research and Development (R&D) activities in the annual reports of listed companies provide crucial insights into a company’s internal governance, external competitiveness, and long-term sustainability strategies. However, R&D disclosures in China’s securities market are largely semi-mandatory, often leading listed companies to adopt either “self-enhancement” or “self-suppression” approaches in their R&D activity descriptions. This inconsistency between actions and disclosures erodes trust among market participants and exacerbates information asymmetry. Based on annual report data from Chinese manufacturing firms, this study assesses the intensity of R&D activity disclosures from both accounting data and textual information using Latent Dirichlet Allocation (LDA) topic modeling and principal component analysis (PCA). Normalized difference metrics are applied to quantify the level of inconsistency between these two dimensions. Empirical findings reveal a prevalent degree of inconsistency in R&D activity descriptions within manufacturing firms’ annual reports. Furthermore, both accounting and textual disclosure intensities have increased over time, with inconsistency levels initially rising and then showing a marked decline. The findings offer a theoretical basis for enhancing and standardizing R&D activity descriptions and disclosures, serving as a resource for government, companies, third-party agencies, and investors.
Authors and Affiliations
Jing Li;Jing Qi;Yanchun Zhu;Wei Zhang;Yicen Jiang
Keywords
Related Articles
- EP ID EP758958
- DOI https://doi.org/10.56578/jote020301
- Views 6
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