Do poor and good performing companies report differently? The readability and impression management in corporate narrative documents: evidence from Northern Europe
Abstract
The purpose of this paper is to assess the effect of financial performance on textual features of the CEO’s statement. Specifically, given the incentives of poorly performed companies engage in impression management, the study investigates whether companies’ reporting strategy hinges on its financial performance. The research questions are tested through analysis of a variety of textual features in the CEO’s statement of 30 good and 30 poor performed companies listed on NASDAQ OMX Stockholm. We apply a range of textual characteristics drawn mostly from prior studies in given realm to the specific research of impression management in the CEO’s report. Overall our findings do not corroborate impression management claim, as six out of seven our results run counter to assertions made by impression management research. We found although evidence that poorly performed companies more focused on future compared with good performed companies. Finally, we conclude by discussing our results and outlining some avenues for further research.
Keyword : readability, obfuscation, annual reports, CEO’s statement, accounting narratives, impression management
How to Cite
Pasko, O., Minta, S., Rudenko, S., & Hordiyenko, M. (2020). Do poor and good performing companies report differently? The readability and impression management in corporate narrative documents: evidence from Northern Europe. Business: Theory and Practice, 21(2), 835-849. https://doi.org/10.3846/btp.2020.12583
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Falschlunger, L. M., Eisl, Ch., Losbichler, H., & Greil, A. M. (2015). Impression management in annual reports of the largest European companies. Journal of Applied Accounting Research, 16(3), 383–399. https://doi.org/10.1108/JAAR-10-2014-0109
Fleming, A. S., Hermanson, D. R., Kranacher, M.-J., & Riley, R. A. Jr. (2016). Financial reporting fraud: public and private companies. Journal of Forensic Accounting Research, 1(1), A27–A41. https://doi.org/10.2308/jfar-51475
Hadro, D., Klimczak, K. M., & Pauka, M. (2017). Impression management in letters to shareholders: evidence from Poland. Accounting in Europe, 14(3), 305–330. https://doi.org/10.1080/17449480.2017.1378428
Heath, R. L., & Phelps, G. (1984). Annual reports II: Readability of reports vs. business press. Public Relations Review, 10(2), 56–62. https://doi.org/10.1016/S0363-8111(84)80007-7
Hogan, C. E., Rezaee, Z., Riley, R. A. Jr., & Velury, U. K. (2008). Financial statement fraud: insights from the academic literature. AUDITING: A Journal of Practice & Theory, 27(2), 231–252. https://doi.org/10.2308/aud.2008.27.2.231
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Jones, M., & Smith, M. (2014). Traditional and alternative methods of measuring the understandability of accounting narratives. Accounting, Auditing & Accountability Journal, 27(1), 183–208. https://doi.org/10.1108/AAAJ-04-2013-1314
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Li, F. (2008). Annual report readability, current earnings, and earnings persistence. Journal of Accounting and Economics, 45(2–3), 221–247. https://doi.org/10.1016/j.jacceco.2008.02.003
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