No abstract

This paper examines managerial, self-serving, disclosure practices in the headlines of press releases announcing annual results. Headlines are a framing feature that can be used to capture and retain attention with the ultimate intention of affecting the thoughts and feelings of readers, thus influencing their opinions. Therefore, headlines have a key role in a company's communication strategy. Using a large sample of Spanish listed companies for the years 2005 and 2006, we provide evidence of persistent impression management in press release headlines. Companies, irrespective of whether they perform well or badly, are inclined to stress good news and downplay bad news. Companies with very small profits report surprising amounts of good news. We provide evidence that companies are selective in the performance figures they include in the headlines of press releases. In particular, the disclosure of profits or sales figures in press release headlines is also associated with earnings performance. Finally, we find that larger firms are more likely to issue press releases than smaller ones, consistent with the theory that highly visible firms face a greater demand for information transparency.

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We study the market's reaction to the disclosure of non‐GAAP earnings measures that are combined with high impression management. We construct an impression management score that captures several communication techniques that managers often use to positively bias investors’ perceptions of firm performance. We hand‐collect and code both quantitative and qualitative information from earnings announcement press releases of large European firms. Our results indicate that non‐GAAP measures are informative to capital markets. However, non‐GAAP adjustments are more persistent when accompanied by higher levels of impression management. This evidence is consistent with managers attempting to distort users’ perceptions when non‐GAAP adjustments are of lower quality. Market reaction tests suggest that investors are able to see through managers’ intentions and discount non‐GAAP information that is accompanied by high impression management. Moreover, investors in more sophisticated markets penalize non‐GAAP measures communicated with high impression management. Our results are robust to a battery of sensitivity tests, including the use of a machine‐coded tone measure.

This study investigates the effects on organization's financial performances of, firstly, the extent to which the organizations are involved in controversial business activities, and secondly, their level of social performance. These companies can be considered non-socially responsible given the harmful nature of the activities they are involved in. Managers of these companies may still have incentives to pursue socially responsible actions if they believe that engaging on those actions will help them to achieve legitimacy and improve investors' perception about them. We develop a comprehensive methodology to investigate these corporate social performance related effects in a complex but specific setting. To this end, we analyze a sample of 202 US firms for the period 2003-2008 using a novel method in this area: partial least squares. Our results indicate that, contrary to the general findings in prior literature, companies involved in controversial business activities which engage in corporate social performance (CSP) do not directly reduce the negative perception that stakeholders have about them. Instead, we found evidence of a positive mediation effect of CSP on financial market-based performance through innovation.