Do words reveal the latent truth? Identifying communication patterns of corporate losers

Identifying communication patterns of narratives in disclosed financial statements is assuming importance in recent times. This paper explores the communication patterns through various channels of loser firms which have witnessed prolonged underperformance and compare the same w.r.t their peers from the same industry. We perform sentiment analysis in published communication of these firms, to scrutinize their tone and emotional-valence. Our findings suggest that loser firms have a negative mood while conveying earnings vis-à-vis their comparable firms. Further, it is ratified that loser firms lack trust, joy, and surprise elements and they depict a surge of fear and sadness in their communication. Moreover, the themes of discussion using the topic modeling approach are indicative of concerns that may have affected the performance of losers. This study has the potential to unveil early warning signals for firms who are in bad shape, which otherwise remains undetected through numerical disclosures.