Antecedents of corporate misconduct: A linguistic content analysis of decoupling tendencies in sustainability reporting

Abstract

Corporate social irresponsibility and corporate misconducts are a severe threat to the endeavours to establish more responsible business practices. Therefore, academia and practice alike try to find ways to anticipate these behaviors. In this regard, linguistic analysis can provide an approach to detect decoupling tendencies of firms, that is to identify firms that fail to walk the talk. This paper examines how the sustainability reports of eight manufacturing firms in the automotive and aircraft industries differ in regard to their linguistic composition. By applying the Linguistic Inquiry and Word Count software, we emphasize how sustainability reports of decouplers and implementors differ in morphology, syntax, semantics and pragmatics. The analysis reveals that decouplers, among other factors, communicate in a less cognitively complex way. As they use shorter sentences, more informal language, less past and future references, and fewer conjunctions, we derive that decouplers are characterized by a lower linguistic sophistication. Moreover, decouplers’ reports can be classified by their linguistic hubris, which is defined by fewer emotional references, more self‐references, less references to risk and anxiety, and heavy reliance on male language. The paper contributes to the debate on decoupling and corporate social irresponsibility, identifies linguistic antecedents of corporate misconduct, and enriches the domain of CSR reporting with a linguistic perspective. It supports the understanding of managers, policymakers and stakeholders of firms to evaluate whether a firm may fail to walk the talk.

Founder CEOs, personal incentives, and corporate social irresponsibility

“…This study also has important practical implications. Concerns about the pervasiveness of CSI are rising (Conrad & Holtbrügge, 2021). Finally, this study provides initial practical practices for shareholders and regulators to guard against CSI by revealing how CEOs' founder status and CEOs' personal incentives together shape firms' CSI actions.…”

“…For example, China's 2008 outbreak of contaminated dairy products caused varying degrees of trauma to nearly 300,000 infants and children (Gao et al, 2012). Considering the prevalence and harmfulness of CSI, it is particularly important and urgent to identify the antecedents of CSI (Conrad & Holtbrügge, 2021;Zhong et al, 2021a). The CEO, as the top decision-maker, determines whether firms respond to or ignore the demands and interests of stakeholders (Tang et al, 2015).…”

The impact of environmental disclosure on initial public offering underpricing: Sustainable development in Singapore

“…The algorithm for authenticity was based on a series of studies on the language used by people who were asked to tell lies or truths (Newman et al, 2003). Unauthentic texts contain fewer markers of cognitive complexity, more motion words, fewer exclusion words, fewer first‐person and third‐person pronouns (Conrad & Holtbrügge, 2021; Crilly et al, 2016; Jordan et al, 2018; Newman et al, 2003). A higher score means that the narrative is more authentic (Pennebaker et al, 2015).…”

“…For instance, Hooghiemstra (2000) and Meng et al (2014) show that following environmental mishaps, firms may increase the level of self‐praising or favorable disclosures to distract stakeholders' attention away from their wrong‐doings. Signs of deception in sustainability disclosures (Martínez‐Ferrero et al, 2019; Melloni et al, 2017) can be revealed by noting the linguistic features (such as grammar, conjunctions, and tenses) of corporate communications that capture authenticity, and the evidence suggests that such features in sustainability disclosures can identify the decoupling tendencies of firms, that is, firms that fail to walk the talk (Conrad & Holtbrügge, 2021; Crilly et al, 2016). Hence, investors may no longer be easily swayed by optimistic statements as linguistic features offer subtle cues about the authenticity of positive news and enable investors to decide whether to trust corporate disclosures.…”

Corporate fraud as a negative signal: Implications for firms’ innovation performance

“…Although rarely explored, it is urgent and important to systematically explore the above topics. As one of the most serious ethical threats to the business environment, corporate fraud ‐ the violation of the securities regulation system, disclosure system, and securities trading system by listed companies in operating their companies and business ‐ is universal (Conrad & Holtbrügge, 2021; Stuart & Wang, 2016; Zhong et al., 2021a). For example, Stuart and Wang (2016) found that more than half of Chinese technology companies intentionally misrepresented their performance.…”