Words Matter: Essays on The Relationship Between Executive Word Choice and Investor Evaluation

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Guo, Wei
Goldfarb, Brent
Kirsch, David A
This dissertation examines the relationship between executive word choices and investor evaluations. Although the importance of language in organizations and the legitimating effect of language for new ventures has stimulated rich theoretical and empirical discussion, scholars still know little about whether, how, and when the language used by executives at established organizations influences external constituents (e.g., investors). I address these questions using two studies. In the first study, drawing from theories of persuasion and attitude change in social psychology, I examine the effect of emotional messages used by executives on investor evaluations and identify persuasion as one path by which executive language influences investors. In the second study, I combine two theoretical perspectives, the market signaling theory in economics and the construe-level theory in psychology, and investigate the effect of executives' use of realism words on investor evaluations. The second study identified signaling as another path by which executive language influences investors. Hypotheses from both studies were tested using a sample of 4,324 verbatim transcripts of 694 organizations' executive presentations at investor conferences between 2004 and 2010. This dissertation contributes to the strategy literature by providing an alternative theoretical framework that focuses on the psychological effect of executives' word choice, and by identifying two paths by which the language of executives in established organizations influence investor evaluations.