Communication

Bayesian probability

Corporate finance

Actuarial science

Revenue recognition

Accounting

Conversation

Economics

Computer science

Financial accounting

Psychology

Political science

Earnings

Artificial intelligence

Revenue

Finance

Accounting information system

Credibility

Review of Accounting Studies

This study examines the impact of SEC comment letters on future financial reporting outcomes and earnings credibility. Naïve Bayesian classification identifies comment letters associated with future restatements and write-downs. An investor attention-based quantitative measure of importance, using EDGAR downloads, also predicts these outcomes. Disclosure-event abnormal returns, revenue recognition comments, and the number of letters in a conversation appear to be useful quantitative metrics for classifying importance in certain settings. This study also documents trends in comment letter topics over time and identifies topics associated with the textual and quantitative classifications of importance, providing insights into the factors that draw investor attention and that relate to future restatements and write-downs. Innocuous comment letters are associated with improvements in earnings credibility following comment letter reviews.

Textual classification of SEC comment letters