Rhetorical impression management in corporate narratives and institutional environment

We study rhetorical impression management in the letter to shareholders using linguistic style properties of text and investigate whether the company’s institutional environment affects the rhetorical style of the CEO in the shareholder letter. The effect of the institutional environment is examined by comparing linguistic style of US and UK companies in a longitudinal setting. We use automated text analysis procedures to capture linguistic style characteristics and discern three distinct linguistic style profiles with rhetorical effect: an acclaiming or assertive stance, a more defensive framing position and a logic-based cognitive impression management orientation. Consistent with our expectations of higher intrinsic incentives for rhetorical impression management in the US, we find that, after controlling for company-specific determinants, all three composite linguistic style profiles show to be significantly more prominent in US companies than in UK companies. Our results further show that credibility concerns and litigation risk affect the rhetorical style of the shareholder letter in the US where higher institutional scrutiny tends to sharpen sensitivity to credibility issues and litigation risk.