Use of impression management practices in the chairman’s statements in South African annual reports

Abstract

Impression management is the study of how individuals present themselves to be perceivedfavourably. Using agency theory, this article investigates impression management practices,influenced by the company’s underlying performance, that may be present in the chairman’sstatements in annual or integrated reports of Johannesburg Stock Exchange listed companies inSouth Africa. This research uses content analysis and specifically focuses on the identificationand measurement of three pre-determined textual characteristics referenced in these chairman’sstatements. There is reasonable evidence to suggest that management employs impressionmanagement strategies that are dependent on the level of a company’s performance. In addition,while variability in readability was not found to be a strategy used to manage impressions, theoverall readability of the chairman’s report was found to be relatively difficult and this, in turn,may affect the ability of stakeholders to benefit from the information it contains. This study islimited to the analysis of a single section of narrative reporting (the chairman’s statement) and, assuch, does not consider any impression management practices that may be present in the restof the annual or integrated report as well as in other communications between stakeholders andthe company in question. It is anticipated that the results will be of importance to professionalaccountancy bodies, users and preparers considering the negative perception of the accountingprofession owing to recent scandals. This is also one of the first studies to explore the use ofimpression management practices in South Africa and the linguistic variation employed inmanagement commentary within a South African context, thereby contributing to the readabilityof the chairman’s statements.