Impression Management and Retrospective Sense-Making in Corporate Annual Reports: Banks’ Graphical Reporting During the Global Financial Crisis

Abstract

Impression management and retrospective sense-making in corporate annual reports:banks' graphical reporting during the global financial crisis Abstract:This study investigates two potentially complementary reporting scenarios in annual reports: reactive impression management and retrospective sense-making. It examines stock market performance graphs in European listed banks' annual reports before and during the global financial crisis. Our results indicate that banks reacted to the global financial crisis by omitting stock market performance graphs from the annual report and from its most prominent sections. On the other hand, banks reduced favourable distortions and favourable performance comparisons. No significant evidence of retrospective sense-making is found. Overall, the findings are consistent with impression management incorporating human cognitive biases, with companies preferring misrepresentation by omission over misrepresentation by commission. Under high public scrutiny, banks appear to seek to provide a more favourable view by concealing negative information, rather than by favourable distortions or comparisons. The study contributes to the development of impression management theories. It uses a psychological interpretation that incorporates human cognitive biases, rather than adopting a purely economically-based perspective.

The voice of profit: exploring the tone of Australian CEO's letters to shareholders after the global financial crisis

“…The possibility of bias in the CEO letter still exists, however, even if this stems from the sense-making process rather than being self-serving Huff and Schwenk (1990). It may also be due to the cognitive (omission) bias of the CEO or "genre rules" for positive accounting narratives (Jones et al, 2017;Rutherford, 2005). We observe this bias particularly with the use of strong modal words.…”

“…Following agency theory the letter has been viewed as a discretionary, free-style, unaudited narrative that can be manipulated for opportunistic reasons (Balata and Ga etan, 2005;Merkl-Davies and Brennan, 2011). Evidence for this view is scarce, however, with bias if detected, being due to CEO cognitive bias rather than self-serving or deliberate (Clapham and Schwenk, 1991;Weber, 1990;Jones et al, 2017). Others contend that psychologically more realistic assumptions better explain executives' choices than the rational choice model (Marnet, 2007).…”

Impression management tactics in the CEO statements of Turkish sustainability reports

“…Concealment occurs when firms obscure bad events or emphasize positive ones (Merkl‐Davies & Brennan, 2007). Omission appears when organizations selectively present their performance in the best possible light and deflect stakeholders’ attention away from the company's negative actions (Jones et al., 2017). Appendix A1 provides illustrative examples of all impression management tactics identified in our analysis.…”

First-movers and industry shakeups: How public newspapers define value

“…Companies routinely pair these required SEC documents with annual reports that resemble glossy magazines—replete with photos, graphs, charts, and pull quotes—that help tell the company’s “story” through its culture, values, and history (David, 2001, p. 207). Corporate leaders use these documents (SEC filings and annual reports) both to contextualize past events and to justify corporate decision-making (Jones et al, 2017). Companies that are financially imperiled tend to take a more futuristic approach in their narratives, prioritizing the potential of forward-looking ventures, instead of discussing past failures (Kohut & Segars, 1992).…”