Rhetorical impression management in the letter to shareholders: determinants and consequences

Date: 18 September 2014

Venue: University of Antwerp, Promotiezaal Grauwzusters - Lange Sint-Annastraat 7 - 2000 Antwerp

PhD candidate: Beibei Yan

Principal investigator: Prof Walter Aerts

Short description: Phd defense Beibei Yan - Faculty of Applied Economics

Abstract: We investigate rhetorical impression management in the letter to shareholders (also known as the president's letter, the CEO letter or the chairman's statement), building on linguistic style properties of the narrative. As the letter is personalized and usually signed by the CEO or the Chairman of the Board, it is taken to represent top management's construal of the most prominent corporate events and achievements, their embedded beliefs and values. It tends to define the essential elements of the corporate performance environment, to describe the context in which the company operates and to portray the normative and empirical bases on which to judge a company's actions. Unlike the actual financial statements in the annual report, the content of the letter is unaudited and highly discretionary.
We use automated text analysis procedures to capture linguistic style characteristics of the letter to shareholders. Based on a factor analysis we discern three prominent composite style profiles with distinct rhetorical effect: an assertive self-presentation patterns ('Emphatic assertiveness'), a more defensive framing position ('Cautious sensegiving') and a logic-based cognitive impression management ('Rational appeal'). These dominant rhetorical profiles are identified in a cross-country setting using a sample of US and UK companies. In addition, we investigate company-specific and country-level institutional determinants of those rhetorical profiles. we investigate how institutional scrutiny and litigation-related concerns may impact the verbal stance of top management in the shareholder letter. Moreover, we examine how the rhetorical impression management in the shareholder letters contain useful information for external financial analysts and reflect incremental information for predicting the future financial performance of the company.