Corporate Communication as a Governance Mechanism

Kolahgar, S., Babaghaderi, A., Bhabra, H. S. (2021), “Corporate Communication as a Governance Mechanism: A Content Analysis of Corporate Public Disclosures”, Corporate Ownership & Control, 18(3), 438-468. https://doi.org/10.22495/cocv18i3siart16

31 Pages Posted: 12 Dec 2019 Last revised: 25 Jun 2021

See all articles by Sam Kolahgar

Sam Kolahgar

University of Prince Edward Island, Faculty of Business

Azadeh Babaghaderi

University of Windsor

Harjeet S Bhabra

John Molson School of Business, Concordia University

Date Written: October 25, 2019

Abstract

Corporate communication efforts have mainly been viewed as a by-product of governmental regulations and board of directors’ oversight. In this paper, we examine the role of corporate communication as a stand-alone governance mechanism. We introduce a new business-related dictionary and conduct automated textual analysis of over 150,000 electronic documents filed by a sample of firms listed on the S&P/TSX Composite Index from 1999 to the end of 2014. Our findings demonstrate the governing role of corporate communication by documenting the adverse market effects of deviations from the expected level of communication. Moreover, as a governance mechanism, corporate communication shows substitution/complementary relationships with other established governance mechanisms. In addition, we find a non-linear relationship between a firm’s communication efforts and its value and risk levels. Results are robust after controlling for major corporate events (M&A, Spin-offs, Financial distress and bankruptcy, and significant lawsuits). These findings contribute to corporate governance literature and the understanding of agency theory predictions of communications and disclosures' economic effects.

Note: Previous titles: Impact of Firms Communication and Disclosure on Risk and Value (2016 to 2018) Effect of Firm’s Investor Relation, Communication and Disclosure on Risk (2015)

Keywords: Corporate Governance, Corporate Communications, Content Analysis, Bundles of Governance Mechanisms, Non-linearity, Dictionary

JEL Classification: G30, G32, D80, D83, D82

Suggested Citation

Kolahgar, Sam and Babaghaderi, Azadeh and Bhabra, Harjeet S, Corporate Communication as a Governance Mechanism (October 25, 2019). Kolahgar, S., Babaghaderi, A., Bhabra, H. S. (2021), “Corporate Communication as a Governance Mechanism: A Content Analysis of Corporate Public Disclosures”, Corporate Ownership & Control, 18(3), 438-468. https://doi.org/10.22495/cocv18i3siart16, Available at SSRN: https://ssrn.com/abstract=3494598 or http://dx.doi.org/10.2139/ssrn.3494598

Sam Kolahgar (Contact Author)

University of Prince Edward Island, Faculty of Business ( email )

Charlottetown, P.E.I. C1A 4P3
Canada

Azadeh Babaghaderi

University of Windsor ( email )

401 Sunset
Windsor N9B 3P4, Ontario
Canada

Harjeet S Bhabra

John Molson School of Business, Concordia University ( email )

Montreal, Quebec H3G 1M8
Canada

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