Give it to us straight (most of the time): Top managers’ use of concrete language and its effect on investor reactions

Abstract

Research Summary: Building on the communications and linguistics literatures, we explore the language attributes managers use in interactions with investors and the subsequent reactions of investors. Specifically, we hypothesize that top managers’ use of concrete language attributes in communication with investors broadly associates with positive investor reactions. We further posit that this relationship will be moderated by the level of firm risk. Our results support our hypotheses and, thus, offer important insights to the impression management literature. First, subtle elements of managerial communication can have significant impression management consequences. More specifically, language concreteness is a key language attribute that generally induces positive investor responses. Finally, the effectiveness of language concreteness is conditional on the informational environment of the firm. Managerial Summary: How can managers communicate in a way that presents the firm more positively or reduces the negativity associated with perceived firm risks? Our findings indicate that choosing appropriate persuasive language features in interactions with investors can help a firm manage its impressions. Specifically, we find that top managers’ use of concrete language that provides details and specific information in communication with investors, in general, garners positive investor reactions. Further, the effectiveness of top managers’ use of concrete language depends on investor concerns. More specifically, we find that when a firm is seen as having a riskier profile, using concrete language helps induce a more positive investor response; while when a firm is seen as low risk, using abstract language may be more beneficial.

Expansive and contractive communication scope: A construal level perspective on the relationship between interpersonal distance and communicative abstraction

“…Recent work has also found benefits of concrete communication in some leadership contexts, finding that CEOs' concrete communication on earnings calls is associated with more positive investor reactions (Pan, McNamara, Lee, Haleblian, & Devers, ). Interestingly, this pattern applied to firms with high financial risk profiles, but the opposite was found for firms with low financial risk profiles, a pattern that the authors attribute to high‐risk firms needing to assuage investor uncertainty (which can be done via concrete speech), but low‐risk firms benefiting from signaling their own confidence and beliefs in the stability of the current favorable environment (which can be accomplished via abstract speech).…”

Machine learning approaches to facial and text analysis: Discovering CEO oral communication styles

“…In our review of strategy research on CEO communication, the workhorse methodological tool has been content analysis of CEO written communication, such as the analysis of CEO letters to stakeholders (Salancik & Meindl, ; Watzlawick et al, ). A recent literature looks at the text of earnings conference call presentations (Pan et al, ). The method of choice in the recent literature has been the LIWC method.…”

“…As Bandiera, Guiso, Prat, and Sadun () argue, CEOs need to create organizational alignment, and this requires significant investment in communication across a broad variety of constituencies, including the persuasion of internal and external stakeholders to embrace cognitively distant opportunities (Gavetti, ). In prior research on CEO communication, the focus has been on content analysis of text from written communication by the CEO, using data such as CEO letters to stakeholders (Barr, ; Gamache & McNamara, ; Kaplan, ; Salancik & Meindl, ; Watzlawick, Bavelas, & Jackson, ); there is also a recent literature that analyzes transcripts of earnings conference call presentations (Pan, McNamara, Lee, Haleblian, & Devers, ). To code text‐based communication, the current approach in CEO communication research is to use dictionary‐based methods, such as the linguistic inquiry and word count (LIWC) software (Gamache & McNamara, ; Pan et al, ).…”

Media Coverage of Firms: Background, Integration, and Directions for Future Research

“…This ambiguity in language is, in turn, a predictor of the accuracy of the reporting. Future research could study further language characteristics such as readability, concreteness, or the use of metaphors and other tropes, all of which have been demonstrated to potentially have consequences for audience reception (König et al, 2018; Pan, McNamara, Lee, Haleblian, & Devers, 2018; H.-T. Tan, Wang, & Zhou, 2014).…”