This study examines how algorithmic trading (AT) affects forward-looking disclosures in Management Discussion and Analysis (MD&A) of annual reports. We predict and find evidence that AT relates negatively to modifications in year-over-year forward-looking MD&A disclosures. This evidence is consistent with AT reducing investors’ demand for fundamental information, which reduces managers’ incentives to supply costly forward-looking disclosures. Cross-sectional tests provide additional evidence that this negative relation is more pronounced for firms with larger earnings surprises and those with losses. We further validate our conclusion by demonstrating that investors’ fundamental information searches are a channel through which AT affects forward-looking disclosures. The conclusion is robust to using the SEC's Tick Size Pilot Program as an exogenous shock to AT and to using alternative disclosure measures (e.g., tone revisions and number of sentences in forward-looking MD&A disclosures). Overall, our study demonstrates that AT is a contributing factor to regulators’ concerns over the diminishing usefulness of forward-looking information in MD&A disclosures.

中文翻译：

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算法交易和前瞻性 MD&A 披露


本研究探讨了算法交易 (AT) 如何影响年度报告的管理层讨论与分析 (MD&A) 中的前瞻性披露。我们预测并发现证据表明，AT 与逐年前瞻性 MD&A 披露的修改呈负相关。这一证据与 AT 减少投资者对基本信息的需求一致，从而降低了管理者提供昂贵的前瞻性披露的动机。横截面测试提供了额外的证据，表明这种负相关关系对于盈利意外较大的公司和亏损的公司更为明显。我们通过证明投资者的基本面信息搜索是 AT 影响前瞻性披露的渠道来进一步验证我们的结论。对于使用 SEC 的 Tick Size 试点计划作为对 AT 的外生冲击以及使用替代披露措施（例如，前瞻性 MD&A 披露中的语气修改和句子数量），该结论是强有力的。总体而言，我们的研究表明，AT 是监管机构担心 MD&A 披露中前瞻性信息的有用性逐渐减弱的一个促成因素。