Episode 30: Financial communication

Words & Actions

As mentioned in the episode, there is a lot of literature on readability in financial communication and its effects. A few selected studies are:

• Huong Dau, N., Van Nguyen, D., & Thi Thanh Diem, H. (2024). Annual report readability and firms’ investment decisions. Cogent Economics and Finance, 12(1). https://doi.org/10.1080/23322039.2023.2296230

• Bonsall, S. B., & Miller, B. P. (2017). The impact of narrative disclosure readability on bond ratings and the cost of debt. Review of Accounting Studies, 22, 608-643.

• Li, F. (2008). Annual report readability, current earnings, and earnings persistence. Journal of Accounting and Economics, 45 (2-3), 221-247.

Both Bernard and Erika mention PhD work on financial communication. Bernard’s student Nils Smeuninx completed his thesis in 2018; the title is “Dear Stakeholder. Exploring the language of sustainability reporting: A closer look at readability, sentiment and perception”. Erika refers to a PhD study on how small investors respond to plain English as opposed to more complex or less readable text:

• Rennekamp, K. (2012). The complexity of qualitative accounting disclosures: Managers’ choices and investors. Cornell Theses and Dissertations. https://hdl.handle.net/1813/31452

For her part, Veronika co-supervised a student – Xiaoxi Wu, now at Bocconi University in Milan (Italy) – with the Accounting department at Lancaster University (UK), resulting in this article:

• Koller, V., & Wu, X. (2023). Analysts’ identity negotiations and politeness behaviour in earnings calls of U.S. firms with extreme earnings changes. Corporate Communications, 28(5), 769-787. DOI: 10.1108/CCIJ-08-2022-0098

Erika mentions the Juno app, which is designed to explain technical financial language to lay investors. Here is the screenshot of the example she mentions:

Bernard then refers to Veronika’s first foray into financial communication and narrative accounting:

• Merkl-Davies, D. M., & Koller, V. (2012). “Metaphoring” people out of this world: A critical discourse analysis of a chairman’s statement of a UK defence firm. Accounting Forum, 36(3), 178-193.

An agentless passive, the sentence ‘mistakes were made’ helps to avoid blaming anyone for making mistakes. It has become a catchphrase, often used humorously to hint at disaster, including in gifs and memes:

Back to financial communication: Referring to the gendered metaphors that it often features, Erika mentions this book chapter:

• Boggio, C., Fornero, E., Prast, H., & Sanders, J. (2017). Seven ways to knit your portfolio: Is investor communication neutral? In Garzone, G., Catenaccio, P., Grego, K., & Doerr, R. (eds) Specialised and Professional Discourse Across Media and Genres (pp. 137-160). Ledizioni.

A cross-cultural study into accounting language is

• Doupnik, T. S. and Richter, M. (2004), The impact of culture on the interpretation of in-context verbal probability expressions. Journal of International Accounting Research, 3(1), 1-20.

In the first part of the episode, we also discuss tone as an important concept in financial communication. Intriguingly, media studies have shown that coverage in itself is good enough for the so-called “markets” (investors, analysts, fund managers) to have a positive attitude towards a company:

• Engelberg, J. E., & Parsons, C. A. (2011). The causal impact of media in financial markets. Journal of Finance, 66(1), 67-97.

Finally, the 2019 annual report by Lockheed Martin, which includes the CEO statement that we analyse at the end of the episode, can be found here.

We will be back in 2025, with some changes to the podcast – stay tuned!

Listen to the episode here

Full transcription of the episode

Words & Actions episode 30 transcriptDownload