Readability and Thematic Manipulation in Corporate Communications: A Multi-Disclosure Investigation
This study investigates the prevalence of two significant impression management strategies, thematic manipulation and reading ease manipulation, across a range of distinct corporate narrative communications and explores the determinants of such practices. Prior studies have tended to examine impression management strategies independently. Further, studies typically only consider a single disclosure type. This suggests that research has overlooked the fact that managers are likely to consider a range of alternative disclosures and impression management approaches in developing their disclosure strategies. By considering a range of both disclosure types and impression management strategies, this study attempts to uncover important interrelationships between these factors, thereby enriching our understanding of corporate disclosure strategies. A sample of 824 disclosures made by listed companies in Australia and New Zealand is examined. The disclosures include key narratives typically contained in annual reports including the chairman’s letter, management’s discussion and analysis, the notes to the accounts, and any embedded Corporate Social Responsibility (CSR) report. Additionally, narratives contained in separately issued CSR reports were studied. The study finds weak evidence of readability manipulation obfuscating the disclosures of poorer performing companies. However, the themes within the disclosures of poorer performing companies tended to closely mirror those of more well performing companies – an observation consistent with the Pollyanna principle. The study also finds that disclosures with a positive tone are more readable than those with a negative tone, a result consistent with the obfuscation hypothesis. CSR reports are found to be more readable than annual reports in general and have significantly different thematic characteristics. Interestingly, CSR disclosures in annual reports differed considerably in terms of their readability from their counterparts in dedicated CSR reports.