Bragging Rights: Does Corporate Boasting Imply Value Creation?
61 Pages Posted: 26 Mar 2018
Date Written: March 25, 2018
We examine all S&P 500 firms over 1999-2014 that publicly characterize their annual performance with extreme positive language. We find that only 18% of such firms increase shareholder value, while nearly 75% have insignificant performance, and the remaining 7% actually destroy shareholder value. Our evidence suggests that firms often base their positive claims on high raw returns or strong relative accounting performance. In comparison to firms that generate positive abnormal returns without boasting, our sample firms tend to have superior accounting performance. These results show that boasting about performance is rarely associated with value creation and is consistent with executive narcissism.
Keywords: shareholder wealth, shareholder value, shareholder wealth maximization, abnormal returns, accounting performance, textual analysis, press releases, annual report
JEL Classification: G30, G32
Suggested Citation: Suggested Citation