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Article
Publication date: 25 February 2019

Prapaporn Kiattikulwattana

The purpose of this paper is to investigate the information content in letters to shareholders in terms of business content, tone and types of business vocabulary.

Abstract

Purpose

The purpose of this paper is to investigate the information content in letters to shareholders in terms of business content, tone and types of business vocabulary.

Design/methodology/approach

The study uses multiple regression models to test the information content concerning business content, tone, and types of business vocabulary in letters to shareholders. Two textual analyses in accounting research dictionaries are used. Loughran and McDonald’s (2011) dictionary is used as a scheme to identify the positive and negative words, and Kothari et al.’s (2009) dictionary is used to identify the business vocabulary.

Findings

Letters to shareholders contain incremental information for investors. First, the results show that the market reacts negatively to the content of these letters. The more that business content is disclosed, the lower the abnormal returns. It can be seen that investors catch additional information from letters to shareholders. Second, investors in negative unexpected earnings firms tend to not trust the concentration of positive tone in the letters. Third, some types of business vocabulary in the letters have an influence on investors’ decisions. In addition, larger amounts of business content are seen to be negatively related to firms’ future performance.

Practical implications

Due to the effect of the content of letters to shareholders, the Securities Exchange Commission may wish to consider the results of this study before setting new disclosure regulations. Specifically, some inside information might have a negative effect on market returns.

Originality/value

The study indicates that letters to shareholders are a disclosure venue between companies and investors, where investors react to certain business vocabulary. Some business words are associated with lower future performance. Therefore, the market reacts negatively when these words are reported in the letters.

Details

Asian Review of Accounting, vol. 27 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 2 November 2015

Syed Tariq Anwar

The purpose of this paper is to investigate textual issues and communication patterns of CEOs/chairmen/presidents’ letters to shareholders in the post-2008 financial…

Abstract

Purpose

The purpose of this paper is to investigate textual issues and communication patterns of CEOs/chairmen/presidents’ letters to shareholders in the post-2008 financial crisis period. By taking a global perspective, the work specifically explores how 307 banks from 15 countries communicated the issues of financial crisis with shareholders, customers and other stakeholders in their letters to shareholders published in the banks’ annual reports.

Design/methodology/approach

By using content analysis and qualitative research, the work specifically analyzes 307 letters to shareholders that constitute 1,028 pages.

Findings

Results of the work suggest that textual features and communication patterns of letters to shareholders remain distinct regarding corporate messages that banks delivered to their shareholders. There was little resemblance between financial institutions regarding their communicative patterns. This could be the result of cultural issues, diverse business environments, regulatory standards, discursive information and hidden business practices.

Research limitations/implications

Within our limited data (307 banks), the significance of this paper lies in its timeliness and relevance to the post-2008 financial crisis period and its worldwide business disruptions.

Practical implications

Practitioners need to use the results of this research and should be familiar with the main causes of the crisis that remain controversial and complex.

Social implications

Global markets and society as a whole were impacted by the severity and longevity of this crisis because of losses, socioeconomic disruptions and business bankruptcies.

Originality/value

Original value of this work falls within the domains of global financial markets and multinational banks.

Details

International Journal of Commerce and Management, vol. 25 no. 4
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 5 August 2021

Salah Aldain Abdullah Alshorman and Martin Shanahan

This study examines the association between firm profitability and the “voice” of the CEO measured through tones they convey in their annual letter to shareholders. The…

Abstract

Purpose

This study examines the association between firm profitability and the “voice” of the CEO measured through tones they convey in their annual letter to shareholders. The paper examines whether the tones corresponds to a firm's profitability and the extent to which CEO tone varies with changes in profitability.

Design/methodology/approach

The authors analyze 187 Australian CEOs communications in 748 annual letters to their shareholders between 2010 and 2013. Two-word lists created by previous researchers are used to assess tones for their positive-negative plurality, uncertainty and use of modal words. Firm profitability is identified using return on assets. The authors examine the relationship between profitability and tones using simple ANOVA as well as a linear mixed model and then a change (differences) model. The change model captures any inertia or genre effect in the CEO letter to shareholders.

Findings

Using both the level and change model, the authors find that firm profitability is associated with CEO's tones that are more optimistic and less pessimistic. The authors also find that the use of negative words has more communicative value than positive words or “net” positive words. The authors also observe some genre effect when CEOs use strong modal words.

Research limitations/implications

The sample is restricted to a selection of Australian firms that had the same CEO for the fiscal years 2010–2013; which reported in each financial year and which survived the global financial crisis. Generalizing the findings to other periods, types of firms, or to CEOs with shorter tenure, might be questionable. This study was conducted in Australia, which may limit the applicability of the findings to other jurisdictions.

Practical implications

The significant link between firm profitability and CEOs' use of positive, net positive and negative words implies that investors may place reliance on the use of these tones in the CEO's annual letter to accurately reflect the profitability of the firm.

Originality/value

The study extends the existing literature by examining whether a change in firm profitability is linked to a change in CEO tone. It concludes that even in periods of general financial stress, shareholders should be confident that CEOs' letters to shareholders provide credible information that corresponds to firm performance.

Details

Corporate Communications: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1356-3289

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Article
Publication date: 8 February 2013

Niamh M. Brennan and John P. Conroy

Can personality traits of chief executive officers (CEOs) be detected at a distance? Following newspaper speculation that the banking crisis of 2008 was partly caused by…

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3606

Abstract

Purpose

Can personality traits of chief executive officers (CEOs) be detected at a distance? Following newspaper speculation that the banking crisis of 2008 was partly caused by CEO hubris, this paper seeks to analyse the CEO letters to shareholders of a single bank over ten years for evidence of CEO personality traits, including narcissism (a contributor to hubris), hubris, overconfidence and CEO‐attribution. Following predictions that hubris increases the longer individuals occupy positions of power, the research aims to examine whether hubristic characteristics intensify over time.

Design/methodology/approach

This paper takes concepts of hubris from the clinical psychology literature and applies them to discourses in CEO letters to shareholders in annual reports. The research comprises a longitudinal study of the discretionary narrative disclosures in the CEO letters to shareholders in eight annual reports, benchmarked against disclosures in the CEO letters to shareholders of the previous and subsequent CEOs of the same organisation.

Findings

The results point to evidence of narcissism and hubris in the personality of the bank CEO. Over half the sentences analysed were found to contain narcissistic‐speak. In 45 per cent of narcissistic‐speak sentences, there were three of more symptoms of hubris – what Owen and Davison describe as extreme hubristic behaviour. In relation to CEO overconfidence, only seven sentences (2 per cent) contained bad news. More than half of the good news was attributed to the CEO and all the bad news was attributed externally. The research thus finds evidence of hubris in the CEO letters to shareholders, which became more pronounced the longer the CEO served.

Research limitations/implications

The analysis of CEO discourse is highly subjective, and difficult to replicate.

Originality/value

The primary contribution of this research is the adaptation of the 14 clinical symptoms of hubris from clinical psychology to the analysis of narratives in CEO letters to shareholders in annual reports to reveal signs of CEO hubris.

Details

Accounting, Auditing & Accountability Journal, vol. 26 no. 2
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 9 April 2020

Supavich (Fone) Pengnate, Derek G. Lehmberg and Chanchai Tangpong

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…

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.

Details

Corporate Communications: An International Journal, vol. 25 no. 2
Type: Research Article
ISSN: 1356-3289

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Book part
Publication date: 12 June 2017

Taekjin Shin

In this study, I explore the link between workforce downsizing and the predominance of a corporate governance model that espouses a shareholder value maximization…

Abstract

In this study, I explore the link between workforce downsizing and the predominance of a corporate governance model that espouses a shareholder value maximization principle. Specifically, I examine how top managers’ shareholder value orientation affects the adoption of a downsizing strategy among large, publicly traded corporations in the United States. An analysis of CEOs’ letters to shareholders indicates that firms with CEOs who use language that espouses the shareholder value principle tend to have a higher rate of layoffs, after controlling for various indicators of the firm’s adherence to the shareholder value principle. The finding suggests that corporate governance models, particularly those advocated by powerful organizational elites, have a significant impact on workers by shaping corporate strategies toward the workforce. The key actors in this process were top managers who embraced the new management ideology and implemented corporate strategy to pursue shareholder value maximization.

Details

Emerging Conceptions of Work, Management and the Labor Market
Type: Book
ISBN: 978-1-78714-459-0

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Article
Publication date: 19 June 2017

Sanja Pupovac and Lee Moerman

The purpose of this paper is to use a hybrid account of oil spills in Nigeria to explore the recursive relationship between a multinational company, specific shareholders

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1223

Abstract

Purpose

The purpose of this paper is to use a hybrid account of oil spills in Nigeria to explore the recursive relationship between a multinational company, specific shareholders and the public. A response to Mr and Mrs Shareholders’ concerns is considered an exercise in corporate discursive hegemony and enacts rhetorical accountability.

Design/methodology/approach

The authors adopt Debord’s (1967, 1988) concept of the spectacle with Boje’s (2001) antenarrative approach as a critical postmodern framing of Shell’s narrative of oil spills in both local and global contexts. An antenarrative approach considers how stories are woven to produce a unified and omnipotent narrative or image.

Findings

MNCs face considerable uncertainties arising from the operational conditions in developing countries and produce a range of accounts for spectators. As theatrical events, they contribute to the spectacle of power that rationalises controversy and suppresses resistance.

Research limitations/implications

To overcome the limitations of using a single document as empirical material the authors consider the response letter as an example of an institutional framing of oil spill phenomena in general.

Social implications

By understanding the construction of the spectacle the authors open avenues for resistance to corporate discursive hegemony in the form of carnivalesque.

Originality/value

The paper adds to the understanding of hybrid forms of resistance in an era of increasing MNC power and reach. It demonstrates how the actual production and distribution has persuasive power as a form of rhetorical accountability.

Details

Accounting, Auditing & Accountability Journal, vol. 30 no. 5
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 December 2004

Ian Palmer, Adelaide Wilcox King and Dianne Kelleher

How organizations communicate with shareholders during times of great uncertainty, such as during transformational change, is a relatively neglected area within the change…

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3849

Abstract

How organizations communicate with shareholders during times of great uncertainty, such as during transformational change, is a relatively neglected area within the change management literature. We use the concept of “change conversation” and speech act theory to analyze GE's letters to shareholders 1980‐1999. We found five consistent change conversations through which GE's management sought to reassure shareholders and reduce their uncertainty around the expected outcomes of GE's transformational changes: warnings; actions; explanations; achievements, and predictions. These were underpinned by three types of speech acts: assertives, expressives, and commissives. We suggest that internally and externally oriented change conversations differ, the former being best characterized as operational change conversations and the latter as supportive change conversations. We suggest that successful change managers engage in both types of change conversations.

Details

Journal of Organizational Change Management, vol. 17 no. 6
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 3 June 2019

Beibei Yan, Walter Aerts and James Thewissen

This paper aims to investigate the informativeness of rhetorical impression management patterns of CEO letters and examines whether these rhetorical features affect…

Abstract

Purpose

This paper aims to investigate the informativeness of rhetorical impression management patterns of CEO letters and examines whether these rhetorical features affect financial analysts’ forecasting behaviour.

Design/methodology/approach

The authors use textual analysis on a sample of 526 CEO letters of US firms and apply factor analysis on individual linguistic style measures to identify co-occurrence patterns of style features.

Findings

The authors identify three holistic style patterns (assertive acclaiming, cautious plausibility-based framing and logic-based rationalizing) and find that assertive rhetorical feature in CEO letters is negatively related with the dispersion of financial analysts’ earnings forecasts and positively associated with earnings forecast accuracy. CEOs’ use of a rationalizing rhetorical pattern tends to decrease the dispersion of financial analysts’ earnings, whereas a cautious plausibility-based rhetorical position is only marginally instrumental in getting more accurate earnings predictions.

Practical implications

Whilst impression management communication is often theorized as manipulative and void of real information content, the findings suggest that impression management serves both self-presentation and information-sharing purposes.

Originality/value

This paper elaborates on the co-occurrence of style characteristics in management communication and is a first attempt to validate the external ramifications of holistic style profiles of corporate narratives by focusing on an economic target audience.

Details

Pacific Accounting Review, vol. 31 no. 3
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 November 2006

Frank Bournois and Sébastien Point

Shareholders, investors and potential employees, all attach special importance to understanding a company through its annual report, the status of which has evolved over

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2510

Abstract

Purpose

Shareholders, investors and potential employees, all attach special importance to understanding a company through its annual report, the status of which has evolved over the years: from providing information for the adepts of competitive intelligence, it now provides information available to all stakeholders in the company. But one aspect has not changed: the keynote message of the president that prefaces the annual report. The present article indicates current practice in the matter in the case of 28 leading French companies.

Design/methodology/approach

We have made these companies the subject of a systematic and detailed computer‐assisted analysis.

Findings

Among the main conclusions to be noted are: a varied range of rhetorical cosmetics by way of embellishment, and attitudes either of prudence or optimism on the part of company heads; a type of discourse open to several levels of interpretation: from a literal level to a level allowing the reader to interpret the wider spirit and intention of the document.

Originality/value

In view of the time devoted to the preparation and fine‐tuning of a presidential letter, we feel justified in writing a modest letter of recommendations for the attention of the president at the end of this contribution.

Details

Journal of Business Strategy, vol. 27 no. 6
Type: Research Article
ISSN: 0275-6668

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