Beschreibung:
Linguistic specificity effectively reduces barriers to information cognition, increasing the efficiency of information acquisition, integration and processing. Combining the psycholinguistics theory of the concreteness effect with asset-pricing theory, we determine that linguistic specificity in the management discussion and analysis section of a firm’s annual reports is negatively associated with stock price synchronicity, particularly in firms with strong external information demand or insufficient information supply. Furthermore, only specificity of the review section leads to a reduction in stock price synchronicity. Mechanism tests show that specificity reduces information processing costs and enhances information credibility. Additionally, proprietary costs are an essential determinant of linguistic specificity adoption. Our findings suggest that linguistic specificity plays an essential role in improving market pricing efficiency.