This paper explores the spillover effects of Management Discussion and Analysis (MD&A) disclosure on the manager’s bad news hoarding behavior. We provide strong evidence that the peer firms’ optimistic tone in MD&A disclosures is positively associated with firm-specific stock price crash risk. Due to increased competitive pressures caused by the optimism of competitors, managers have larger incentives to hoard negative news from the public to protect themselves. Moreover, we find that the relationship manifests more when the product market is highly competitive and when the stock market is more liquid. Our results are robust, surviving tests for propensity score matching (PSM), change analysis, firm fixed effects model, alternative MD&A narrative tone variables and alternative industry fixed effects model. 

Key words: spillover effects, MD&A disclosure, texture analysis, FinBERT, stock price crash risk

JEL classification: G30, G32, M41​