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Predicting Firm Reputation Through Content Analysis of Shareholders' Letter

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In this study, we use content analysis to measure the usefulness of the narrative content of the chairman's letter to the shareholders as a possible proxy for corporate reputation. Firms with both high and low corporate reputations are identified using three prominent rating services. Using content analysis, significant variations in word choice, word length and word variety are found between these two groups. The firms with a high corporate reputation use less varied, shorter and more concrete words than the low reputation firms. These high reputation firms concentrate on realism with a matter-of-fact type of style. Based on these variables, a logit regression successfully classifies 81 percent of our study firms according to perceived reputation. The results are further tested by matching unranked corporations to our study firms. The logit values for the matched firms are statistically different from those of the study groups. We attribute this to content differences in the letter to the shareholders. This significant association between narrative content and corporate reputation suggests that management uses the shareholders’ letter as a tool of reputation management.Corporate Reputation Review (2008) 11, 285–307. doi:10.1057/crr.2008.32

Document Type: Research Article


Affiliations: 1: 1Finance Department, University of Nebraska – Lincoln, Lincoln, NE, USA 2: 1: 2School of Accountancy, University of Nebraska – Lincoln, Lincoln, NE, USA 2: 3Program in Business Ethics, University of Nebraska – Lincoln, Lincoln, NE, USA

Publication date: 2008-01-01

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