Bragging Rights: Does Corporate Boasting Imply Value Creation?

61 Pages Posted: 26 Mar 2018  

Pratik Kothari

University of Missouri at Columbia - Department of Finance

Don M. Chance

Louisiana State University, Baton Rouge - Department of Finance; Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Date Written: March 25, 2018

Abstract

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

Kothari, Pratik and Chance, Don M. and Ferris, Stephen P., Bragging Rights: Does Corporate Boasting Imply Value Creation? (March 25, 2018). Available at SSRN: https://ssrn.com/abstract=3149899 or http://dx.doi.org/10.2139/ssrn.3149899

Pratik Kothari

University of Missouri at Columbia - Department of Finance ( email )

Columbia, MO 65211
United States

Don M. Chance (Contact Author)

Louisiana State University, Baton Rouge - Department of Finance ( email )

2163 CEBA
Baton Rouge, LA 70803
United States

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Baton Rouge, LA 70803-6308
United States
225-578-0372 (Phone)
225-578-6366 (Fax)

HOME PAGE: http://www.bus.lsu.edu/academics/finance/faculty/dchance/

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Register to support our free research

Register

Paper statistics

Downloads
127
rank
199,907
Abstract Views
3,190
PlumX