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Bragging rights: Does corporate boasting imply value creation?

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  • Kothari, Pratik
  • Chance, Don M.
  • Ferris, Stephen P.

Abstract

We examine S&P 500 firms over 1999–2014 that characterize their annual performance with extreme positive language. Only 18% of such firms increase shareholder value, while over 80% have either negative or insignificant abnormal returns. Our evidence suggests that firms often base their claims of extreme positive performance 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. We conclude that boasting about performance is rarely associated with value creation and is more consistent with an emphasis on accounting metrics.

Suggested Citation

  • Kothari, Pratik & Chance, Don M. & Ferris, Stephen P., 2021. "Bragging rights: Does corporate boasting imply value creation?," Journal of Corporate Finance, Elsevier, vol. 67(C).
  • Handle: RePEc:eee:corfin:v:67:y:2021:i:c:s0929119920303072
    DOI: 10.1016/j.jcorpfin.2020.101863
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    Cited by:

    1. Liu, Xiaoyu & Zhao, Ti & Li, Ran, 2023. "Studying the green economic growth with clean energy and green finance: The role of financial policy," Renewable Energy, Elsevier, vol. 215(C).

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    More about this item

    Keywords

    Shareholder wealth; Shareholder value; Shareholder wealth maximization; Abnormal returns; Accounting performance; Textual analysis; Press releases; Annual report;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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