The Spillover Effects of Peer Annual Report Tone for Firm Innovation Investment: Evidence from China

In this study, we investigate the relationship between the tone of annual reports of peer firms and the innovation investment of focal firms based on data from Chinese listed companies. We demonstrate that the tone of the annual reports of peer companies promotes innovation and investment by focusing on companies through two channels: information mechanisms and competition mechanisms. This conclusion is robust after overcoming endogeneity problems and carrying out robustness tests. We discern two boundary conditions in our research: the information supply of peer firms and the degree of industry competition. When the information supply of peer firms and the degree of industry complexity are higher, the tone of the annual reports of peer firms will play a greater role in promoting the innovation investment of focal firms. This study extends the research on the information disclosure of peer firms and firm innovation investment based on the context of emerging markets.