Marsha Weber

Using Communication Theory to Analyze Corporate Reporting Strategies

Regulatory reforms in the United States, such as Sarbanes-Oxley and Regulation Fair Disclosure, emphasize the significance of timely and transparent corporate reporting. Analysis of corporate financial disclosures using communication theory can provide useful information to stakeholders. Communication is a goal-directed activity that involves a purpose, and one of the central goals of communication for the corporation is to maintain a positive image. Benoit’s theory of image restoration says that management presents the messages (responses) that are instrumental in obtaining the firm’s goals. This article’s objectives are to summarize Benoit’s image restoration typology and to propose its potential use in analyzing management’s communication strategies in financial reporting. The authors provide examples from corporate U.S. Securities and Exchange Commission (SEC) and annual reports of computer companies to illustrate the use of various communication strategies based on Benoit’s typology.

A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation

Most simultaneous equations studies analyze the coefficients from the structural forms of the models, which provide estimates of the direct effects of independent variables on the dependent variables in each equation, but ignore the indirect effects these independent variables have on dependent variables in other equations. This paper modifies the work of Chung and Pruitt (1996) by extending the model to include board composition and institutional ownership variables and then estimating the structural and derived reduced form coefficients for the extended model. The signs and significance of the reduced form coefficients differ in several material respects from the results of the structural form coefficient analysis, which suggests that analysis of only the structural form coefficients is incorrect and potentially misleading. Copyright 2003 by the Eastern Finance Association.

Crisis Communication in the Banking Industry: Countrywide's Use of Image Restoration Strategies

Abstract This case study analyzes Countrywide Financial’s responses to its recent financial crisis and illustrates the use of communication theory and image restoration strategies by utilizing several crisis response frameworks. The study uses a critical analysis methodology to examine the communication strategies employed by Countrywide, a large mortgage lending company in order to attempt to restore its image. The authors look at excerpts from media stories, carefully examine the language used by company representatives in response to the banking crisis, and categorize the corporate communications into various strategies as defined in the crisis communication literature. Countrywide faced several crisis situations during the period of this study, including the subprime mortgage crisis, public criticism of its CEO’s executive compensation package, allegations of insider trading, and financial difficulties. Corporate responses are critical in determining what amount of damage is done to the firm’s image during a crisis. Countrywide responded to these situations most often using the strategies of image bolstering, reducing the credibility of its accuser, and minimizing the crisis (Benoit, 1995). Through these communications, the company attempted to appear well established and untarnished. It also criticized the media, the courts, and the regulators in an attempt to reduce their credibility. Countrywide made no deliberate attempt to admit fault or to take measures to prevent the problem from reoccurring.