The impact of tones of executive communication on firm risk-taking: Evidence from performance volatility and acquisition spending

Hanqing Zhao, Heng Liu*, Man Yang, Huiyang Li

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Although current research has demonstrated that executive verbal communication could shape shareholders’ expectancy and responses, the hazards of executive communication and firms’ follow-up responses are largely neglected. Based on expectancy violation theory, we explore how different levels of managerial tone trigger a firm’s risk-taking to avoid violating shareholder expectancy. Using a computer-aided approach to identify managerial tones, our empirical study based on Chinese listed firms indicates that managers tend to take more risks (illustrated by higher performance volatility and acquisition spending) after delivering high-level (optimistic) or low-level (pessimistic) linguistic tones at an earnings communication conference. The results are robust by employing several endogeneity checks. We also identify a mediating role of shareholder reactions and the moderating role of firm prominence. These findings contribute to the executive communication literature by suggesting firms adopting risky strategies in response to shareholder reactions led by managerial tone.
Original languageEnglish
Peer-reviewed scientific journalAsia Pacific Journal of Management
DOIs
Publication statusPublished - 21.05.2024
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Managerial tone
  • Expectancy violation
  • Risk-taking
  • U-shaped
  • Executive communication

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoHP: Strategic and entrepreneurial praxis

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