DefinePK

Research Objective

To expose the use of impression management practices in voluntary narrative disclosures, specifically examining the length and tone of the chairperson's statement in Top 40 Johannesburg Stock Exchange (JSE) listed companies.

Methodology

Quantitative content analysis of secondary data extracted from integrated reports of Top 40 JSE-listed companies. The study focused on the 2020 financial year and used 2019 comparable profit before tax to classify companies as profitable or nonprofitable. Impression management was assessed through the length (word count and pages) and tone (sentiment analysis) of the chairperson's statement. Mann-Whitney non-parametric tests were used to determine significant differences.

Methodology Flowchart

                        graph TD
    A["Identify Top 40 JSE-listed Companies"] --> B["Extract Integrated Reports"];
    B --> C["Classify Companies: Profitable/Nonprofitable based on 2019-2020 Profit Before Tax"];
    C --> D["Extract Chairperson's Statements"];
    D --> E["Analyze Length: Word Count & Page Numbers"];
    D --> F["Analyze Tone: Sentiment Analysis using Azure ML"];
    E --> G["Apply Mann-Whitney Test for Length Differences"];
    F --> H["Compare Sentiment Percentages"];
    G --> I["Hypothesis Testing"H1.1""];
    H --> J["Hypothesis Testing"H1.2""];
    I --> K["Results & Discussion"];
    J --> K;
    K --> L["Conclusion"];                    

Discussion

The study suggests that both profitable and nonprofitable JSE-listed companies engage in impression management within their chairperson's statements, aligning with stakeholder theory's emphasis on value creation. The longer statements from unprofitable companies may serve as a tactic for damage control or justification of negative results. The greater use of positive tone by profitable companies suggests a correlation between positive financial performance and optimistic communication. The findings highlight the potential for voluntary narrative disclosures to be used strategically to influence stakeholder perceptions, even when there isn't a statistically significant difference in certain textual characteristics like length.

Key Findings

1. Unprofitable JSE-listed companies, on average, used longer chairperson's statements (more words and pages) than profitable companies.
2. Profitable companies exhibited a more positive sentiment in their chairperson's statements compared to unprofitable companies.
3. Despite differences in average length and tone, the Mann-Whitney tests indicated no statistically significant difference in the length of chairperson's statements between profitable and nonprofitable companies.
4. The null hypothesis regarding the difference in length was accepted, while the null hypothesis regarding the difference in positive tone was rejected.

Conclusion

Top 40 JSE companies, regardless of profitability, employ impression management in their chairperson's statements to pursue stakeholder value. While profitable companies use a more positive tone, the length of statements did not show a significant difference between profitable and unprofitable entities. The study acknowledges limitations due to the COVID-19 pandemic and suggests future research on post-pandemic impression management and the role of other governance structures.

Fact Check

* The study focused on Top 40 Johannesburg Stock Exchange (JSE) listed companies.
* Unprofitable companies had an average of 1,773 words in their chairperson's statements, compared to 1,480 words for profitable companies.
* Profitable companies showed 33% positive sentiment in their chairperson's statements, while unprofitable companies showed 25% positive sentiment.

Mind Map