A longitudinal examination of the relationship between corporate financial performance and the corporate persona revealed in the annual report

Abstract

This research examines the relationship between organizational financial performance and the levels of charisma and optimism revealed in the annual report. Hypotheses were developed based on the meta-theory of the organization as a social actor and previous empirical results regarding the relationship between organizational financial performance and the constructs of charisma and optimism. Based on previous research it was hypothesized that organizational financial performance would be positively related to charisma and optimism at the within-firm and between-firm levels of analysis. A content analysis of annual reports was performed and financial performance was collected for each company in the study for the years 2001–2010. The data was analyzed utilizing hierarchical linear modeling (HLM) in SAS 9.2 to test the hypotheses. The annual reports were analyzed utilizing the DICTION 5.0 software package and an optimism and charisma score were generated for each company. The sample for the study were all companies within the restaurant and petroleum industries traded on the New York Stock Exchange (NYSE) that had available data for the years 2001–2010. The control variables employed in the study were company size and research and development (R&D) intensity. In addition, industry membership was treated as a moderating variable. The findings indicate that on average a firm will demonstrate higher levels of optimism when its financial performance is significantly higher than its baseline level of financial performance. In addition, on average, the restaurant industry demonstrated higher levels of charisma and optimism than the petroleum industry. The implications of these findings and the directions for future research regarding the organization as a social actor are discussed.