CEO Letter Research Articles

Do CEO gender and narcissism jointly affect CEO letter readability?

AbstractThe objective of this paper is to explore the impact of two CEO characteristics, gender diversity and narcissism, on disclosure quality through an examination of the joint effect of gender diversity in management and CEO narcissism. Based on 452 shareholder letters (CEO letters in the annual report) issued by French firms, our results suggest that female CEOs enhance the readability level of corporate disclosures. Our findings provide evidence that narcissism mediates women CEOs’ positive effect on the readability of CEO letters. This study extends previous studies on gender diversity by providing new insights into how women CEOs affect the quality of disclosures.

Representation of the “business‐self”: Professionals’ construction of multifaceted identities in written business communication

AbstractThis study explores professionals’ construction of their multifaceted identities as representatives of their corporations in business writing. The self‐mention framework is applied to explore the representation of the “business‐self” which I propose encompasses the projection of individual, collective, and corporate identities. A corpus of 100 CEO's letter to shareholders was examined for the use of personal pronouns and company referential terms and collocation analysis performed to understand the surrounding discourse contexts. The findings reveal a distinct hierarchy of identities; US business professionals communicate with stakeholders by immersing themselves in the identity of the collective and make a concerted effort to project the corporate identity, whereas representation of the individual self is minimal. The study provides important insights into the identity construction work undertaken by professionals in authentic business texts and the findings can help inform English for Specific Purposes (ESP) practitioners of business communication courses in higher education.

CEO narcissism, board of directors and disclosure quality: evidence from the readability of CEO letter

CEO narcissism, board of directors and disclosure quality: evidence from the readability of CEO letter

A new take on voice: the influence of BlackRock\u2019s \u2018Dear CEO\u2019 letters

We examine whether broad-based public engagement by institutional investors influences the behavior of portfolio firms. We investigate this question in the context of BlackRock’s annual Dear CEO letter, which in recent years has called for portfolio firms to acknowledge and quantify the impact of environmental and regulatory factors on their firms. We find that portfolio firms’ disclosures during the post-letter period reflect topics similar to those discussed in the letters, controlling for a variety of firm and disclosure characteristics and the occurrence of private engagements. Moreover, BlackRock appears to value these additional disclosures, as it more often votes with management on shareholder proposals during subsequent annual shareholder meetings. Finally, motivated by BlackRock’s attempts to mobilize firms toward its specific policy recommendations, we also provide some evidence that firms’ lobbying efforts during the post-letter period become more aligned with the issues highlighted in the letter, especially when firms’ share BlackRock’s policy preferences ex ante. Taken together, our evidence suggests that portfolio firms are responsive to BlackRock’s public engagement efforts.

The voice of profit: exploring the tone of Australian CEO's letters to shareholders after the global financial crisis

PurposeThis 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/approachThe 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.FindingsUsing 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/implicationsThe 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 implicationsThe 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/valueThe 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.

Impression management through hedging and boosting: A cross-cultural investigation of the messages of U.S. and Chinese corporate leaders

This study explores hedging and boosting as impression management strategies in the discourse of Chinese and U.S. corporations. The analysis has been conducted on the CEO's letter to shareholders of 100 Chinese and 100 U.S. corporations to reveal pronounced variations in the frequencies and pattern of use in the two resources. First, substantially more hedges and boosters are used in the U.S. discourse in comparison to the Chinese, thus, demonstrating a greater effort invested in persuasion in the U.S. texts. Second, the U.S. texts use significantly more boosters than hedges, whereas the Chinese texts show a roughly balanced use of the two resources. Lastly, the two sets of texts have authorial stances that project distinctly different impressions. While the U.S. discourse conveys conviction and certainty, the Chinese discourse imparts more caution and tentativeness. These findings are attributed to a number of dissimilarities in the belief systems of the Western and Chinese cultural models. The results point to possible implications on the effectiveness of the CEO's letters in cross-cultural business contexts.

An Exploration of Authentic, Servant, Transactional, and Transformational Leadership Styles in Fortune 500 CEO Letters

Authors write annual CEO letters to convey specific messages but may not reflect on the leadership styles applied in their communications. The purpose of the current paper is to explore the usage of authentic, servant, transactional, and transformational leadership styles in leadership letters of Fortune 500 companies as a function of nine industrial sectors. The primary methodology for data analysis comprised content analysis and stepwise multiple regression. Results revealed CEO letter writers used transformational leadership most frequently, followed by transactional leadership. Stepwise multiple regression results revealed direct relationships existed between consumer goods and authentic leadership; services, and servant leadership; and utilities and transactional leadership. Additionally, a proposed template for future leadership letters was incorporated to enrich communication in CEO letters by applying specific leadership styles using new leadership paradigms to bolster the existent transformational leadership style.

CEO characteristics and tone at the top inconsistency

This paper provides evidence that different corporate disclosures have different roles and that Chief Executive Officer’s (CEO) characteristics influence language choices. We document that relative to the Management Discussion and Analysis (MD&A), CEO letters to shareholders have more positive tone when describing the same firm performance. While the MD&A provides incremental information to the numerical data in the financial statements, the language in the CEO letter is largely inconsistent with current firm performance and is influenced predominantly by the level of positive words. This inconsistency is attributed to overconfident CEOs, who tend to have an overly positive view of their ability and firm prospects while underestimating firm risk. Further analysis indicates that CEO gender also affects CEO letter language style, with female CEOs using more neutral tone. Taken together, our evidence suggests that CEO letters are an important source of corporate disclosures, which is shaped by CEO characteristics.

Jockeying for Position in CEO Letters: Impression Management and Sentiment Analytics

AbstractThis paper evidences the strategic positioning of positive and negative words within a CEO letter as a subtle form of impression management. We find that managers tend to present information in such an order that the reader of the CEO letter has a more positive perception of the underlying message. We uncover a smile in the frequency of positive words within the letter, and a half smile in the intratextual distribution of negative words, with a prevalence of negative words at the beginning of the letter. We also find a significant positive association between this qualitative impression management and the use of abnormal accruals in earnings management. We propose sentiment analytics that can compensate for the strategic management of narrative structure and find that the proposed position weighted sentiment has more predictive power for the firm performance over the next year.

The Influence of CEO Letters’ Tone on Financial Indicators of the Company

The paper is devoted to the analysis of CEO letters as an instrument for influencing the expectations of shareholders and potential investors. The aim of the research is to analyze empirically the influence of semantic characteristics of CEO letters on financial indicators of the company. The authors suggested that CEO letter’s tonality, its length and readability have a great impact on the company’s financial indicators, their prediction and mid-year stock value. To check the hypotheses stated, a sample group of 102 Russian companies was analyzed with the use of “bag of words” method (specialized dictionaries were applied). For this purpose, neural network models were also developed. The results obtained confirmed the influence of CEO letter’s semantic characteristics on the stock value of company.

Is Executive Hubris Manifested in CEO Letters to Shareholders?

We examine the extent and evolution of Hubris in a bank CEO, through textual analysis of the CEO letter to the Shareholders. Drawing on new developments in clinical psychology we surface evidence of overconfidence, narcissism and hubris over the 2000-2008 period.

The language of executive financial discourse

This paper firstly examines the literature on the linguistic devices of rhetoric in financial disclosure. Secondly, it suggests avenues for future research on the value of executive financial discourse by regarding language as an asset.Using an exploration of the business communication and business discourse literature on financial disclosure over 15 years, it discusses the language issues identified in the literature on the CEO's letter to shareholders and the annual report from a linguistic perspective.Two linguistic devices offer further insights into the value of executive financial discourse: metaphorical expressions and discourse markers.

Tone at the top: CEO environmental rhetoric and environmental performance

In this study we attempted to ascertain the environmental leadership and commitment of the CEO as evidence of “tone at the top” in the belief that this would lead to enhanced environmental performance. We measure “tone at the top” by the environmental disclosure score which is collected from a content analysis of CEO letters to shareholders. We adopt the two environmental performance measures: (1) Environmental Impact Score (EIS) from Newsweek Green Ranking and (2) Modeled Hazard Population Results (MHPR) based on Risk-Screening Environmental Indicator (RSEI) models built by EPA. The results indicate that the environmental disclosure score from the CEO letter is inversely correlated with environmental performance. The overall findings support legitimacy theory in that CEOs essentially “spin” firms' environmental performance so it looks better than it actually is.

A model of trust-repair discourse

This article proposes a novel theoretical framework for examining trust-repair discourse. The model identifies two fundamental discourse strategies available to the trust-breaker when trust is at stake (i) to engage with and act upon the discourses that represent a potential source of distrust – neutralize the negative, (ii) to communicate a trustworthy discourse identity – emphasize the positive. These strategies are realized in discourse through the use of dialogic engagement and evaluative/affective language, respectively. The ultimate communicative goal of the strategies is that of promoting the addressees’ positive (re-)assessment of the speaker's ability, integrity and benevolence. The model is applied to the analysis of the CEO letter published by BP one year after the Deepwater Horizon oil spill. The analysis has the twofold purpose of demonstrating the viability of the model and determining the discourse strategies deployed by the CEO to repair trust in the company after the accident.

All Words Are Not Equal: Sentiment Dynamics and Information Content Within CEO Letters

This paper evidences the strategic positioning of positive and negative words within a CEO letter as a subtle form of impression management. We find that managers tend to present information in such an order that the reader of the CEO letter has a more positive perception of the underlying message. We uncover a smile in the frequency of positive words within the letter, and a half-smile in the intratextual distribution of negative words, with a prevalence of negative words at the beginning of the letter. We propose sentiment analytics that can compensate for the strategic management of narrative structure and find that the proposed position weighted sentiment has more predictive power for the firm performance over the next year.

Factors associated with the publication of a CEO letter

Purpose– In most European code-law oriented Latin countries, the publication of a CEO's letter to shareholders in a company's annual report is a fairly recent phenomenon. In this paper, the authors seek to determine the characteristics that explain why companies in one such country, i.e. Portugal, published a CEO letter.Design/methodology/approach– The paper's holistic theoretical framework draws on elements of agency theory, institutional theory and signalling theory. To understand the characteristics of Portuguese holding companies that published CEO letters, the authors used a logistic regression model to explore 266 observations over the years 2006-2011.Findings– The publication of a CEO letter becomes more likely if a firm is audited by a Big 4 accounting firm; has a higher level of profitability; and has a high number of foreign subsidiaries. Other findings are that finance companies are slightly more likely to publish a CEO letter than non-finance companies. The number of CEO letters increased to a peak in 2008, and then declined.Practical implications– The increasing number of companies now publishing a CEO letter raises the concern for regulatory authorities of whether the content of the CEO letter should be audited, since any numbers presented in the management report have to be audited in Portugal.Originality/value– To the best of the authors' knowledge this is the first empirical exploration of the characteristics that explain why companies publish a CEO letter. Mimetic and normative isomorphism is revealed to be a potentially important influence, since there is a tendency of companies audited by Big 4 accounting companies, and with foreign subsidiaries, to publish a CEO letter.

CEO letters as legitimacy builders: coupling text to numbers

PurposeThe purpose of this paper is to describe and interpret the CEO letter in the annual reports of three multinational Swedish companies. This study focuses on the CEOs' comments on accounting principles and rules, on company decisions and actions, and on external events. Examination of CEO letters reveals how CEOs make themselves accountable to readers and establish their own and their companies' legitimacy.Design/methodology/approachA strategic design was used to select the three companies;.the three criteria used in making the selection were company nationality, age, and stock market listing. A fourth criterion was that the company had been a nominee in the Stockholm Stock Exchange “Best Annual Report” contest. Based on a social constructivist approach, with inspiration from the field of discourse psychology, a discursive action model (DAM) is applied in this research.FindingsThe analysis shows that the CEO letters at two of the three companies do not emphasize numbers and text. In the third company's CEO letters, the numbers are an important component and are balanced with text. It was found that one explanation of the CEO letter format is the CEO's wish to persuade readers of the company's legitimacy, excellence, and future survival. The CEO letter is intended to strengthen readers' confidence in the company.Originality/valueThis paper provides insight into how CEOs use CEO letters in annual reports to craft a corporate image for readers.

Exploring Corporate Rhetoric: Metadiscourse in the CEO's Letter

This article explores how CEOs attempt to influence readers and project a positive personal and corporate image in company annual reports. It examines the role of metadiscourse, as a manifestation ...