Executive Religiosity and Disclosure Tone Ambiguity of Annual Reports

This paper examines the effect of C-suite executive religiosity on the disclosure tone ambiguity of corporate annual reports. The paper utilizes executive-level religiosity, disclosure tone, and financial data from a sample of 2515 publicly listed U.S. corporations. It applies fixed-effect regression analysis to show that the presence of religious executives within the C-suite team reduces the disclosure tone ambiguity of annual reports, as evidenced by a reduction in the number of negative and uncertain words within corporate annual reports. Subsample analyses show that religious CEOs and CFOs in the C-suite primarily drive the main findings, which is consistent with their heightened control over corporate annual report preparation processes post-SOX. The main finding holds across multiple robustness tests and suggests that the individual religiosity of C-suite executives can be an important determinant of a company’s disclosure tone-related choices. By utilizing the measure of executive-level religiosity, this study directly addresses recent calls for further research to examine additional personal and psychological factors beyond executive-level narcissism and political ideology that can influence top management personnel’s corporate disclosure tone-related choices. This study contributes to the literature by examining the influence of individual executive-level religiosity on the tonal sentiment of corporate communications, as represented by corporate annual reports.