Top management's communication in economic crisis and the firm's subsequent performance: sentiment analysis approach
Corporate Communications: An International Journal
ISSN: 1356-3289
Article publication date: 9 April 2020
Issue publication date: 5 May 2020
Abstract
Purpose
In economic crisis, where tensions create anxiety and test the emotions of the firms' shareholders, communication from top management is very crucial as it provides the reflection of the managers' interpretation of the firms' situation and potential strategies. The goal of this paper is to investigate the relationships between sentiment, as an aspect of emotions extracted from the letters to shareholders, managerial discretion and the firms' subsequent performance and performance trajectory during crisis.
Design/methodology/approach
A sentiment analysis was conducted to extract the sentiment from the letters to shareholders, which were collected from firms in two countries with different levels of managerial discretion (US vs. Japan). Hypotheses were developed and tested using a series of regression analysis.
Findings
The primary findings indicate that (1) managerial sentiment identified in letters to shareholders can potentially be related to the firm's subsequent performance in the economic crisis, and (2) managerial discretion moderates the relationship between managerial sentiment and subsequent firm performance.
Practical implications
When the managerial discretion is high, firms' shareholders can use the sentiment in top management communications to gauge whether the firms' situation would be improving in the near future.
Originality/value
This study expands the current research on sentiment analysis and firm performance to the context of economic crisis by suggesting that managerial sentiment can be substantially provoked as firms are facing with stressful economic conditions. The study also highlights the moderating role of managerial discretion on the firms' subsequent performance.
Keywords
Acknowledgements
The authors gratefully thank the Editor and two anonymous reviewers for their constructive comments and insightful suggestions during the review process. The authors also thank the Department of Management and Marketing and the Center for Enterprise Business Analytics at North Dakota State University for their support important to the completion of this research.
Citation
Pengnate, S.(F)., Lehmberg, D.G. and Tangpong, C. (2020), "Top management's communication in economic crisis and the firm's subsequent performance: sentiment analysis approach", Corporate Communications: An International Journal, Vol. 25 No. 2, pp. 187-205. https://doi.org/10.1108/CCIJ-07-2019-0094
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited