Words can make a difference, but are most companies making the most of the potential to shape a narrative through their choice and deployment of words? This interesting piece of research looks at annual reports from a range of U.S. companies to discover if message shaping is being used by management, particularly when it comes to over- and under-performing companies.

Company reports are an essential part of disclosure to shareholders, and this can also act as a form of advertising to prospective shareholders and other stakeholders. Financial statements must be prepared according to standards, but there is flexibility in how these are discussed in the form of narrative.

The research took a sample of 35 companies and submitted their annual reports to computerised content analysis to discover narrative strategies and see how the reports communicate past performance – both ‘offensive’ in the case of over-performance and ‘defensive’ when things were a little more challenging. A brief, but functional literature review set the scene, advancing the desire that companies seek to ‘shape perceptions of organisational outcomes in the context of asymmetric information’ through rhetorical means which justifies linguistic analysis of deployed information.

This led to a primary research question being formed, namely are there statistically significant differences in narrative strategies usage by overperforming and underperforming companies in their annual reports. The research question also branched off to consider specific strategies (certainty, optimism, activity, realism, and commonality). The described methodology was clear and understandable, providing a justifiable mix of data subjects that should provide a broad research base. To focus on the possible attempted shaping of narration, the research focused on the so-called ‘Management Discussion and Analysis (MD&A)’ part of the annual report where company management should ‘present their own views on successes and failures of the company’. The author contended that in this section management is ‘most likely to have an opportunity to use narrative strategies in order to manage expectations, shape perception, and influence the reader’.

In total 59 companies were analysed and data presented in tabulated forms. It is very statistics-heavy, understandably, although slightly greater clarity for those who are not stats nerds would have been welcome. The conclusion was that there were several statistically relevant differences between both groups of companies. The best-performing companies appeared to highlight and emphasise their achievements, using stronger and more determined language in the process. Perhaps not surprisingly, and more defensively, underperforming companies sought to offer assurances and attempt to portray actual and focused facts without stronger, ambitious language.

The research did conclude that no definite conclusion or assumption about language deployment could be made, other than some evidence supporting the idea that underperforming companies may communicate differently than overperforming companies. Research limitations were noted and calls for additional research articulated.