Social trust and corporate qualitative disclosure: evidence from tone management in MD&A

Our study explores the association between province-level social trust and tone management in Management's Discussion and Analysis (MD&A). We argue that a firm's regional social trust is negatively associated with tone management because it creates norms and networks to discipline managers' opportunistic behaviors. By exploring Chinese listed firms, we find that firms in provinces with higher social trust engage in less tone management. Our finding suggests that social trust serves as a mechanism to constrain tone management. While prior studies find that social trust disciplines quantitative disclosure, such as accounting numbers, our study suggests that this disciplining effect also applies to qualitative disclosure.